Making India’s DPI model work for all

The recently concluded G20 summit witnessed two important India-led interventions. One emphasises investments in physical infrastructure through the India-Middle East-Europe Economic Corridor (IMEC). The other emphasises investments in digital public infrastructure (DPI). While IMEC has grabbed more eyeballs, it still seems a sketchy plan compared to the DPI model. The DPI model advanced by India has already found takers in some parts of the Global South.

Five years ago, the International Institute of Information Technology in Bengaluru launched the Modular Open Source Identity Platform (MOSIP) to help other countries set up Aadhaar-like systems. More than 10 countries, from Sri Lanka to Sierra Leone, have initiated MOSIP projects so far. After the G20’s endorsement, many more could sign up for it.

The adoption of the DPI model could open up new vistas of opportunities for India’s IT sector while raising the country’s profile globally. However, the DPI momentum can be sustained only if policymakers take into account both the strengths and weaknesses of India’s own digital infrastructure. They must not lose sight of the chinks in the institutional architecture underpinning India’s DPI model. Fixing these gaps will help Indian citizens, and offer a more robust model for the rest of the world.

There are three key elements of India’s DPI offering that have evinced global interest. First, a digital ID system for citizens that enables authentication of welfare beneficiaries, and helps tackle leakages. Second, an open source software architecture that is designed to avoid dependence on any one technology giant. Third, a fast payment system that can leverage the digital ID system to widen the net of financial inclusion, and catalyse growth.

Growing fiscal concerns have led many governments to consider more efficient ways of distributing welfare benefits. Digitisation is increasingly being seen as a means to save fiscal resources while targeting state spending better. At the same time, digitisation has also raised concerns about the dominance of American big tech and Chinese surveillance tech. India’s offering of an open digital ecosystem taps into these anxieties.

While the MOSIP project is likely to lead to new business for Indian software firms, no single firm will be in a position to dictate terms to any foreign government. The project itself is being led by an academic institution, and not by a software firm. India’s fast payments system is run by a not-for-profit corporation backed by the central bank. These facets of India’s DPI model have burnished its appeal.

Nonetheless, the Indian DPI model is not without its share of challenges. The first challenge is the lack of a robust legal framework to protect citizens’ data. As a parliamentary standing committee had pointed out in 2010, the Aadhaar project should have been started only after a national data protection law was enacted. Yet, the project ran for more than a decade without any such legal cover.

The 2023 data protection law offers much weaker data protection than was envisaged by expert committees set up earlier by the government. As the lawyer Apar Gupta argued in these pages, successive versions of India’s draft data protection law have tended to dilute protection for citizens while expanding the powers of the Indian State. A 2019 document from MOSIP emphasised the need to prioritise “privacy and user control” in partner countries. But India must first practise at home what it preaches abroad.

The second challenge relates to the coercion and exclusion involved in India’s DPI model. Aadhaar was supposed to be an enabler. Once people start realising its benefits, the Aadhaar user base would grow organically, we were told during the early years of Aadhaar. The actual script has been very different.

Aadhaar morphed into a de facto requirement for accessing any benefit or service from the Indian State, or even from financial institutions. This has hurt some of India’s most deprived regions, where data connectivity remains poor and Aadhaar authentication failures are common.

The third challenge relates to the risk of overselling the impact of India’s DPI model. While there is no doubt that India’s progress on digital and financial inclusion has been impressive, there are several other countries with an even more impressive record. An analysis of World Bank data by Suyash Rai of Carnegie India shows that India’s record in financial inclusion has been middling. The growth in penetration of bank accounts has been exceptionally high in recent years. But so has been the share of inactive accounts.

Even in the realm of fast payments, India’s achievements are not as exceptional as government officials would have you believe. Between 2010 and 2021, roughly 50 countries have set up fast payment systems, a 2021 report from the Bank for International Settlements showed. Digital transactions in some of these countries have grown faster than in India. None of these countries needed to demonetise currency notes to boost digital payments.

On balance, India’s DPI model remains an attractive proposition for developing countries. But if India’s “digital belt and road initiative” (as The Economist termed it) is to have a better future than China’s Belt and Road project, Indian policymakers must resist the temptation of premature celebration. Instead of dismissing critics, they need to engage with them, and address the chinks in the DPI model. In doing so, they would be serving the interests of their country and the world at the same time.

Pramit Bhattacharya is a Chennai-based journalist. The views expressed are personal