New Delhi: In a comprehensive report presented to the G20 Global Partnership for Financial Inclusion, the World Bank has hailed India's remarkable progress in the realm of Digital Public Infrastructure (DPI). The report applauds the transformative impact of DPIs in India over the past decade, particularly under the leadership of the Modi government. These digital initiatives have not only revolutionized financial inclusion but have also greatly improved economic efficiency, setting a global benchmark for innovative governance and digital transformation.
The G20 report extensively highlights the ground-breaking measures implemented by the Modi government and underscores the pivotal role of government policy and regulation in shaping the DPI landscape. India's journey towards achieving financial inclusion at a staggering pace is a testament to the power of digital infrastructure combined with effective governance.
Financial Inclusion: A Remarkable Leap
India's Digital Public Infrastructure approach has been nothing short of revolutionary. The World Bank document notes that India achieved in just six years what would have typically taken around five decades. A significant contributor to this success story is the JAM Trinity, which propelled the financial inclusion rate from a mere 25% in 2008 to over 80% of adults in the last six years. This journey was shortened by up to 47 years, primarily thanks to the implementation of DPIs.
The report explicitly acknowledges, "While DPIs' role in this leapfrogging is undoubtable, other ecosystem variables and policies that build on the availability of DPIs were critical. These included interventions to create a more enabling legal and regulatory framework, national policies to expand account ownership, and leveraging Aadhaar for identity verification."
One of the most significant milestones in this journey is the Pradhan Mantri Jan Dhan Yojana (PMJDY). Since its inception, the number of PMJDY accounts opened has tripled, growing from 147.2 million in March 2015 to a staggering 462 million by June 2022. Notably, women own 56% of these accounts, exceeding 260 million.
Furthermore, the Jan Dhan Plus program has encouraged low-income women to save, resulting in over 12 million women customers as of April 2023. In just five months, there has been a 50% increase in average balances among these accounts, reflecting the positive impact of these initiatives. It is estimated that by engaging 100 million low-income women in savings activities, public sector banks in India could attract approximately Rs 25,000 crore ($3.1 billion) in deposits.
Government to Person (G2P) Payments: A Digital Triumph
Over the past decade, India has built one of the world's largest digital Government-to-person (G2P) architectures by leveraging DPI. This innovative approach has facilitated transfers amounting to about $361 billion directly to beneficiaries from 53 central government ministries through 312 key schemes. As of March 2022, this has resulted in a total savings of $33 billion, equivalent to nearly 1.14 per cent of India's GDP.
UPI: A Digital Payment Revolution
The Unified Payments Interface (UPI) in India has witnessed astounding growth. In May 2023 alone, more than 9.41 billion transactions were recorded, with a total value of about Rs 14.89 trillion. For the fiscal year 2022-23, the total value of UPI transactions accounted for nearly 50% of India's nominal GDP. This showcases the widespread adoption of digital payment solutions, further fueled by the Digital Public Infrastructure.
DPIs' Potential Added Value for the Private Sector
The impact of DPIs extends beyond the public sector, significantly enhancing efficiency for private organizations. Notably, some Non-Banking Financial Companies (NBFCs) have experienced an 8% higher conversion rate in Small and Medium-sized Enterprises (SME) lending, leading to a 65% reduction in depreciation costs and a 66% reduction in costs related to fraud detection.
According to industry estimates, banks' costs of onboarding customers in India decreased from $23 to a mere $0.1 with the utilization of DPI. This substantial reduction in costs has made lower-income clients more attractive to service, generating profits and encouraging the development of new products and services.
Lower Cost of Compliance for Banks for KYC
India Stack, a part of the DPI ecosystem, has digitized and simplified Know Your Customer (KYC) procedures, significantly lowering costs for banks. Banks employing e-KYC have seen their cost of compliance drop from $0.12 to a mere $0.06. This decrease in costs has not only streamlined banking operations but has also made lower-income clients more accessible, furthering financial inclusion and generating profits for financial institutions.
Cross-Border Payments: A Global Integration
In a move aligned with the G20's financial inclusion priorities, the UPI-PayNow interlinking between India and Singapore, operationalized in February 2023, has facilitated faster, cheaper, and more transparent cross-border payments. This initiative has not only bolstered India's international financial integration but has also positioned the country as a global leader in digital payments and financial infrastructure.
Account Aggregator (AA) Framework: Strengthening Data Infrastructure
India's Account Aggregator (AA) Framework aims to bolster the nation's data infrastructure, enabling consumers and enterprises to share their data only with their consent through an electronic consent framework regulated by the Reserve Bank of India (RBI). Impressively, a total of 1.13 billion cumulative accounts are now enabled for data sharing, with 13.46 million cumulative consents raised as of June 2023.
This framework empowers individuals and fosters innovation and competition by allowing tailored product and service access without requiring new entrants to invest heavily in pre-existing client relationships.
Data Empowerment and Protection Architecture (DEPA): Putting Data Control in Individuals' Hands
India's Data Empowerment and Protection Architecture (DEPA) grants individuals control over their data, enabling them to share it across providers. This revolutionary approach promotes tailored product and service access without mandating extensive investments from new market entrants in building client relationships. DEPA has emerged as a pivotal component of India's digital infrastructure, fostering innovation and competition in the data-driven economy.
In conclusion, India's Digital Public Infrastructure has not only transformed financial inclusion but has also elevated economic efficiency, making it a model for other nations striving for digital governance excellence. The World Bank's recognition in the G20 report reaffirms India's pioneering role in digital transformation and financial inclusion on the global stage, and these achievements are poised to further accelerate the nation's growth in the digital age.
