Digital Transformation of India

In 2023, Nandan Nilekani, the man behind Infosys, Aadhar and India Stack, made a presentation on India’s digital transformation that has grown viral in recent times.

 

In 2008, we had the world’s most “unbanked” population, i.e., folks without bank accounts. History shows that the fraction of the population with bank accounts is a function of how it rich it is. By 2017, 80% of the population had bank accounts despite the per capita GDP still being low. (For comparison, 80% coverage is usually achieved when a country’s per capita GDP is around 10 times ours.)

 

How did that happen? Two critical factors were the dropping prices of smartphones and the even sharper drop in the price of Internet data costs. In turn, those two factors caused India’s digital payments to take off. The convenience of digital payments further drove the rise of bank accounts. Which then set off another virtuous cycle – subsidies and cash benefits could be transferred directly to recipients with no middlemen or corruption. That became the next major driver for the rise of bank accounts.

 

All this is perfectly summed up in one slide: “Each change acts as input to the next leading to combinatorial innovation”. The increasing rise of Digital Public Infrastructure (DPI) has facilitated the rise of “new approach(es) to solving societal problems”. Everyone uses one or the other form of DPI – it includes systems like UPI, Digi Yatra, eSign, eKYC and FasTAG. DPI has been built one layer at a time, the base layer being a digital ID system called Aadhar. The next layer on top of that was payments; and on top of that, lies data. 

Some of these services are only by government (DigiYatra); others have private players too (GPay, PhonePe, PayTM); and several have regulations defined. Participation of both private and public sectors has been critical.

 

The payment system in particular (UPI) has helped small vendors. No cash, and no credit cards (which needed POS machines and electricity and weren’t viable for small amount transactions). 

Innovations like integrating digital payments with toll booths (FasTAG) speeded up the queue, saved fuel and reduced pollution to boot. Digilocker has helped make transactions paperless and always available (you can have all your ID’s and other important docs always accessible). Consent based data sharing made it easy to share selected data to chosen entities e.g. banks or insurance companies.

 

DPI’s were designed with privacy in mind, not as an afterthought. They had checks like collecting minimum data, sharing controlled by explicit consent, federated mechanisms (ensured no one entity like Google or Facebook became the single master of all that data), and compliant to regulations.

 

In entertainment too, we are increasing consumers in digital format. IPL broadcasting rights amounts were mostly TV based; now the digital share of those rights is comparable to TV rights. This pic captures that perfectly: 

Hence the summary of Nilekani’s deck: “A technology-led model that is collaborative, equitable, and democratises opportunity at population scale”.