IMF Working Paper, India digital infrastructure, Aadhaar, UPI, India Stack
Together, India’s commonly used digital public infrastructure (DPIs) are called India Stack and it served India well during the COVID-19 pandemic, says the paper | Representative Photo

IMF Working Paper ‘stacks up’ benefits of India’s digital infrastructure

An International Monetary Fund (IMF) Working Paper has said that India’s world-class digital public infrastructure is transforming lives and economy, and is worth emulating for many countries.

The Working Paper, titled Stacking up the Benefits: Lessons from India’s Digital Journey, talks about how India’s digital public infrastructure (DPIs) enable online, paperless, cashless, and privacy-respecting digital access to a variety of public and private services.

Together, these commonly used DPIs are called India Stack. It consists of three layers — unique identity (Aadhaar), complimentary payments systems (Unified Payments Interface, Aadhaar Payments Bridge, Aadhaar Enabled Payment Service), and data exchange (DigiLocker and Account Aggregator).

Benefits during pandemic

The benefit of this investment is being felt across the country and served India well during the COVID-19 pandemic, says the paper. It adds that Aadhaar helped facilitate the transfer of social safety net payments directly from the government treasury’s accounts to beneficiaries’ bank accounts, helping reduce leakages, curb corruption, and provide a tool to effectively reach households to increase coverage.

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“Using this digital infrastructure India was able to quickly provide support to an impressive share of poor households during the pandemic. In the first months of the pandemic about 87 per cent of poor households received at least one benefit,” says the paper. The Government of India estimates that, up to March 2021, about 1.1 per cent of GDP in expenditure was saved due to the digital infrastructure and other governance reforms, it adds.

What India Stack has done

India Stack has been used as a platform to foster innovation and competition, expand markets, close gaps in financial inclusion, boost government revenue collection, and improve public expenditure efficiency. Digital payments are now ubiquitous; UPI accounts for 68 per cent of all payment transactions by volume.

The use of digital payments has expanded the customer base of smaller merchants, documenting their cash flow and improving access to finance. Roughly, 4.5 million individuals and companies have benefited from easier access to financial services through the Account Aggregator since it was first launched in August 2021, and adoption is increasing rapidly, it said.

Digitalization has also supported the formalization of the economy, as around 8.8 million new taxpayers registered for the GST between July 2017 and March 2022, contributing to buoyant government revenues in recent years. The government service provision is streamlined; for example, citizens can access documents issued by the state and central governments through one platform.

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Similarly, the India Stack has digitized and simplified Know Your Customer (KYC) procedures, lowering costs; banks that use e-KYC lowered their cost of compliance from USD 12 to USD 6 cents, it said. The decrease in costs made lower-income clients more attractive to service and generated profits to develop new products, it said.

Jandhan scheme

Citing an example of financial inclusion, the paper said there was a push by the government in 2014 to provide access to a no-frills, low-cost bank account that doubled the coverage of individuals with bank accounts.

The Jandhan scheme targeted the financially underserved, especially rural women. Under this initiative, 462.5 million bank accounts were opened in both urban and rural areas as of August 2022.

Using a digital backbone allowed India to scale its vaccine delivery quickly and overcome challenges such as large-scale internal migration, it said, adding that the technology underlying CoWIN has been deployed in Indonesia, Philippines, Sri Lanka, and Jamaica to help facilitate their vaccination programmes.


On the challenges, the paper said comprehensive data protection legislation is still missing in India and a robust data protection framework is essential to protect citizens’ privacy, prevent companies and governments from indiscriminately collecting data, and holding companies and governments accountable for data breaches to incentivize appropriate data handling and adequate investments in cybersecurity.

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The DPI can also help support efforts to make social assistance more resilient and adaptable. For example, it said, Aadhaar can be used to exchange data between various schemes across states.

Finally, it said, leveraging the DPI, India could significantly improve the timelines, quality, and coverage of the general government fiscal reports, enhancing at the same time fiscal transparency for its citizens, a key issue to improve public sector accountability.

(With agency inputs)

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