Digital Infrastructure & FinTech
Digital infrastructure is the new public utility of the twenty-first century, and India has built one of the largest and cheapest digital payment ecosystems in the world. The combination of identity, connectivity, payments and data has changed the way welfare is delivered, businesses are run and services are accessed. This topic links the Digital India programme, the Aadhaar identity system, the payments infrastructure created by the National Payments Corporation of India, and the growing fintech industry. These notes explain the meaning and components of digital public infrastructure, the main platforms and their years, and the concepts of financial technology and cyber security that examinations increasingly test.
The Digital India programme and BharatNet
The Digital India programme was launched on 1 July 2015 with the vision of transforming India into a digitally empowered society and a knowledge economy. It is built on nine pillars, which include broadband highways, universal access to mobile connectivity, public internet access, e-governance, electronic delivery of services, information for all, electronics manufacturing, information technology for jobs and early harvest programmes. BharatNet, earlier known as the National Optical Fibre Network, is the flagship project for connecting all gram panchayats through high-speed broadband, and it is implemented by the Department of Telecommunications under the Ministry of Communications with Bharat Sanchar Nigam Limited as a major executing agency. The aim is to take the benefits of digital connectivity to rural India, where most of the population lives.
Aadhaar and digital identity
Aadhaar is a twelve-digit unique identification number issued by the Unique Identification Authority of India to residents on the basis of biometric and demographic data. It gets its legal backing from the Aadhaar Act of 2016, which also gave statutory status to the Unique Identification Authority of India. Electronic know your customer, or e-KYC, uses Aadhaar-based authentication to verify a customer's identity instantly, which makes it possible to open accounts and obtain services in minutes rather than days. Aadhaar is the identity layer on which much of India's digital public infrastructure rests, and it is used for direct benefit transfer, for opening bank accounts and for obtaining a mobile connection.
Payments infrastructure and UPI
The National Payments Corporation of India was established in 2008 with the approval of the Reserve Bank to build a robust retail payments system, and it is the umbrella organisation for retail payments in the country. The Unified Payments Interface, or UPI, is an instant real-time payment system developed by the corporation that allows money to be transferred between any two bank accounts through a mobile platform, and it was launched on 11 April 2016. BHIM, the Bharat Interface for Money, is a UPI-based mobile application launched in 2016 for easy digital payments. RuPay is India's indigenous card payment network, developed by the National Payments Corporation of India and launched in 2012 as an alternative to international card networks. The Immediate Payment Service, or IMPS, is a round-the-clock instant interbank transfer service launched in 2010. The Reserve Bank regulates digital payment systems, while the corporation operates the UPI platform.
The India Stack and direct benefit transfer
The India Stack is a set of open application programming interfaces and digital public infrastructure that enables paperless, cashless and presence-less delivery of services. It includes Aadhaar, e-KYC, UPI, DigiLocker and newer platforms such as the Open Network for Digital Commerce. DigiLocker, launched by the Ministry of Electronics and Information Technology under Digital India, is a cloud-based platform where citizens can store, access and share documents issued by government agencies in digital form. Direct benefit transfer is the system under which government subsidies and benefits are credited directly into the bank accounts of beneficiaries, and it was launched on 1 January 2013 to remove middlemen and reduce leakage. It rests on the JAM trinity of Jan Dhan accounts, Aadhaar and mobile numbers. The Pradhan Mantri Jan Dhan Yojana, launched on 28 August 2014, provides the bank accounts that make this transfer possible.
Fintech and digital literacy
A fintech, or financial technology, company uses technology to provide financial services such as payments, lending, wealth management and insurance. The growth of UPI has turned mobile phones into payment devices and has encouraged a large number of fintech start-ups. Paytm, one of the best known of these, is operated by One97 Communications Limited. Digital literacy is the ability to use digital technologies, devices and the internet to access information, communicate and conduct financial transactions, and the Pradhan Mantri Gramin Digital Saksharta Abhiyan was launched in 2017 to make rural citizens digitally literate so that they can benefit from these services.
Cyber security and digital currency
As more of life moves online, cyber security becomes essential. The Indian Computer Emergency Response Team, or CERT-In, working under the Ministry of Electronics and Information Technology, is the national nodal agency responsible for cyber security, cyber incident response and cyber crisis management. A cryptocurrency is a digital or virtual currency that uses cryptography for security and operates on a decentralised network such as a blockchain; Bitcoin is not legal tender in India, and the Reserve Bank has cautioned about its risks. In contrast, the central bank digital currency, called the digital rupee, is issued by the Reserve Bank, and its pilot was launched in 2022. Unlike a private cryptocurrency, it is a sovereign liability and a digital form of the rupee.
Key facts at a glance
- Digital India was launched on 1 July 2015.
- Digital India is built on nine pillars.
- BharatNet connects gram panchayats with high-speed broadband.
- The Department of Telecommunications under the Ministry of Communications implements BharatNet.
- Aadhaar is a 12-digit identity number issued by UIDAI.
- Aadhaar gets legal backing from the Aadhaar Act of 2016.
- NPCI was established in 2008.
- UPI was launched on 11 April 2016.
- BHIM is a UPI-based app launched in 2016.
- RuPay, launched in 2012, is developed by NPCI.
- IMPS was launched in 2010.
- DigiLocker was launched by MeitY.
- DBT was launched on 1 January 2013.
- The JAM trinity is Jan Dhan, Aadhaar and Mobile.
- PMGDISHA was launched in 2017 for rural digital literacy.
- CERT-In is the nodal cyber security agency under MeitY.
- The digital rupee pilot was launched in 2022.
Quick revision points
- Digital India stands on nine pillars and aims at a digitally empowered society.
- Aadhaar and e-KYC form the identity layer of the India Stack.
- NPCI builds and runs UPI, RuPay, IMPS and BHIM.
- UPI links any two bank accounts through a mobile platform.
- DBT and the JAM trinity reduce leakage in welfare delivery.
- Crypto is not legal tender; the digital rupee is a sovereign currency.
How to prepare this topic
- Learn the launch years of Digital India, UPI, BHIM, RuPay, IMPS and DBT.
- Match each platform with the institution that runs it, mainly NPCI and MeitY.
- Remember the nine pillars and the JAM trinity.
- Understand the difference between a private cryptocurrency and the central bank digital currency.
- Note the role of CERT-In in cyber security.
- Revise the full forms, which are frequently asked as one-liners.
Common exam traps
- Confusing the year of NPCI formation with the year UPI was launched.
- Attributing UPI to the Reserve Bank alone; NPCI developed it.
- Thinking Bitcoin is legal tender in India; it is not.
- Mixing up DigiLocker, which stores documents, with a payment platform.
- Calling CERT-In a payments body; it is the cyber security nodal agency.
- Mixing up PMGDISHA with PMJDY, one being digital literacy and the other financial inclusion.
Frequently Asked Questions
What is the Digital India programme and when was it launched?
The Digital India programme was launched on 1 July 2015 with the vision of transforming India into a digitally empowered society and a knowledge economy. It rests on nine pillars covering broadband connectivity, universal mobile access, e-governance, electronic delivery of services, electronics manufacturing and information technology for jobs. BharatNet is its flagship connectivity project for linking gram panchayats.
What is UPI and who developed it?
UPI, the Unified Payments Interface, is an instant real-time payment system that allows money to be transferred between any two bank accounts through a mobile platform. It was developed by the National Payments Corporation of India and launched on 11 April 2016. NPCI operates and develops the platform and ensures interoperability between different banks and payment applications, while the Reserve Bank regulates digital payment systems.
What is the India Stack and what are its main components?
The India Stack is a set of open APIs and digital public infrastructure that enables paperless, cashless and presence-less delivery of services. Its main components include Aadhaar for identity, e-KYC for instant verification, UPI for payments, DigiLocker for documents and the Open Network for Digital Commerce. It allows services to be built on top of shared public digital rails.
What is the JAM trinity and how does it help welfare delivery?
The JAM trinity is the combination of Jan Dhan accounts, Aadhaar and mobile numbers. Jan Dhan accounts provide a bank account, Aadhaar provides a unique identity and mobile numbers allow authentication and communication. Together they make direct benefit transfer possible, so that subsidies and benefits reach the intended beneficiary directly without middlemen, reducing leakage and delay.
What is the difference between cryptocurrency and the central bank digital currency?
A cryptocurrency is a digital or virtual currency that uses cryptography and operates on a decentralised network such as a blockchain; it is not issued by the government, and Bitcoin is not legal tender in India. The central bank digital currency, called the digital rupee, is issued by the Reserve Bank of India and is a sovereign liability, and its pilot was launched in 2022.