India has built a world-class digital infrastructure: IMF

India has built a world-class digital infrastructure: IMF
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Washington, Apr 5: 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, IMF has said in a working paper, noting that digitalization has supported formalization of India's economy and Aadhaar has helped in the direct transfer of payments to beneficiaries while reducing leakages.

The working paper ‘Stacking up the Benefits Lessons from India’s Digital Journey” said that the government played a catalytic role, acting as an anchor client and establishing institutions to ensure continuity in India Stack’s operations.

It said that using this digital infrastructure, India was able to quickly provide support to an impressive share of poor households during the COVID-19 pandemic.

The paper said that using a digital backbone allowed India to scale its vaccine delivery quickly and overcome challenges such as large-scale internal migration. The technology underlying CoWIN, a digital platform developed by India to capture the Covid-19a  vaccination programme has been deployed in Indonesia, Philippines, Sri Lanka and Jamaica to help facilitate their vaccination programmes.

The paper said that demonetization led to greater use of other forms of payment, including the UPI .It said 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.

“The Government of India estimates that, up to March 2021, about 1.1 percent of GDP in expenditure was saved due to the digital infrastructure and other governance reforms,” the paper said.

It said that using this digital infrastructure India was able to quickly provide support to an impressive share of poor households during the pandemic.

DPI refers to a set of shared digital building blocks, such as applications, systems, and platforms, powered by interoperable open standards or specifications. India Stack is the collective name of a set of commonly used DPIs in India; it consists of three different layers—unique identity (Aadhaar), complimentary payments systems (Unified Payments Interface, Aadhaar Payments Bridge, Aadhaar Enabled Payment Service), and data exchange (DigiLocker and Account Aggregator). “Together they enable online, paperless, cashless, and privacy-respecting digital access to a variety of public and private services. The benefit of this investment is felt across the country and served India well during the pandemic,” the paper said.

The paper said digital payments are now ubiquitous and UPI accounts for 68 percent 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,” the paper said.

The working paper said that the accessibility of UPI on feature phones and offline modes are also being explored.

It 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".

The IMF paper said DPI can also help support efforts to make social assistance more resilient and adaptable.

"For example, Aadhaar can be used to exchange data between various schemes across states. Finally, leveraging the DPI, India could improve significantly 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," the paper said.

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