Digital Public Infrastructure (DPI)

IN NEWS:

• Recently, the IMF said in a working paper that India has developed a world-class digital public infrastructure (DPI) to support its sustainable development goals, with its journey having lessons for other countries embarking on their own digital transformation.

WHAT IS DIGITAL PUBLIC INFRASTRUCTURE (DPI)?

• Digital public infrastructure (DPI) refers to blocks or platforms such as digital identification, payment infrastructure, and data exchange solutions that help countries deliver essential services to their people, empowering citizens and improving lives by enabling digital inclusion.
• India’s DPI, known as the “India Stack”, a unified software platform, is the first national digital infrastructure in the world.
  • India Stack consists of three different layers—identity layer (Aadhaar, eKYC,  eSign), payments layer (Unified Payments Interface, Aadhaar Payments Bridge, Aadhaar Enabled Payment Service), and data empowerment (DigiLocker and Account Aggregator).
  • Together they enable online, paperless, cashless, and privacy-respecting digital access to a variety of public and private services.

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BENEFITS OF DIGITAL PUBLIC INFRASTRUCTURE (DPI):

• Financial inclusion:
  • Adoption of Aadhaar and digital payment solutions has boosted financial inclusion.
  • For instance, Aadhar-based e-KYC simplifies the process for accessing financial services.
  • According to some estimates, banks that use e-KYC lowered their cost of compliance from Rs 1,000 to Rs 5. The decrease in costs made lower-income clients more attractive to service and generated profits to develop new products.
• Improved efficiency:
  • Aadhaar, helped facilitate the transfer of social safety net payments directly from the government treasury’s accounts to beneficiaries’ bank accounts, helping to reduce leakages, curb corruption and providing a tool to effectively reach households to increase coverage.
  • Also, the Government of India estimates that up to March 2021, the government saved about 1.1 percent of GDP due to the DBT and other governance reforms.
• DPI is a cost-effective investment.
  • The creation of Aadhaar required the government to spend over USD 1 billion.
  • However, at about USD 1 per enrollment, Aadhaar is still one of the cheapest identity projects in the world.
  • Subsequent DPI projects, such as UPI, have had a small outlay, such as building a central switch, but an oversized impact on the formalisation of the economy.
• Formalization of the economy:
  • Digitalization has supported the formalisation of the economy, with around 8.8 million new taxpayers registered for the GST between July 2017 and March 2022, contributing to buoyant government revenues in recent years.
• Better delivery of health and education services:
  • Digitalization enabled better delivery of health and education services.
  • For instance, CoWin helped manage the COVID-19 vaccination campaign and contributed to the reopening of the economy.
  • Also, DIKSHA allowed instruction to move online during COVID-related lockdowns and provided resources for teachers and students to mitigate learning losses (World Bank, 2020).

CHALLENGES:

• Digital divide:
  • The digital divide appears along gender, geographic and income lines.
  • For instance, a mere 14.9 percent of rural households have internet access, compared to 42 percent among urban households.
  • Also, while 43.5 percent of urban men know how to use the internet, only 30.1 percent of urban women and 8.5 percent of rural women do.
• Low digital literacy:
  • Despite significant progress, digital literacy remains low in India, and represents a barrier to engaging with DPI-based solutions.
  • For example, while there has been an exponential increase in UPI-based payments, only 35 percent of persons aged 15 and over have made or received a digital payment.
• Data Protection:
  • There is an increased risk of privacy and security breaches as the DPI requires the collection, storage, and use of large amounts of sensitive and personal data.
  • For example, it has been reported that more than 80 million Indian users were affected by data breaches in 2021 (Business Today, 2021).
  • Also, comprehensive data protection legislation is still missing in India, placing the privacy and other digital rights of users at risk.
• Exclusion errors:
  • Initial experiences with Aadhaar showed that exclusion errors occurred because of fingerprint recognition problems and limited internet connectivity.
  • A 2019 survey found that 2.5 percent of respondents experienced exclusion from a welfare service because of problems with Aadhaar.
• Inadequate digital infrastructure:
  • India’s digital infrastructure is comprehensively inadequate to accommodate the growing increase in digital transactions. One of the major challenges faced by DPI is slow and delayed infrastructure development.
  • For instance, only around 25% of Towers in India are connected with fibre networks, whereas in developed nations, it is in excess of 70%.
• Interoperability:
  • Interoperability is crucial in DPI. Seamless interoperability across systems, however, requires harmonisation of legal and technological frameworks, which is complex and time-consuming.

WAY FORWARD:

• Robust data protection framework:
  • 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.
• Address limits of the system:
  • It is important to address the limits of the system to help prevent the exclusion of genuine beneficiaries and to improve the efficiency of services.
  • It is crucial to establish appropriate digital network such as power, internet and mobile connectivity, correct Aadhaar linking and alternative methods of verification (such as passwords) when biometric verifications fail.
• Improve digital literacy:
  • The government needs to take steps to improve digital literacy among citizens to enable them to fully utilise the opportunities provided by DPI. 
• Socio economic data:
  • The DBT currently does not have access to socio-economic data and is not able to target households based on these data.
  • The unique Aadhaar identifier could enable easier data exchange between various scheme holders. The availability of socio-economic data is key to reach intended beneficiaries.

PRACTICE QUESTION:

Q. "There is more to be tapped in the country’s digital public infrastructure (DPI)". Discuss the benefits associated with the DPI and analyse the challenges associated with it.