India’s Journey to Digital Transformation

with Dr. Pramod Varma

Dr. Pramod Varma talks with us about how India overcame hurdles to create a robust digital ecosystem, including a digital identity program for over one billion people.

Forging a digital innovation path for the future of India

Digital identity has been a fundamental enabler for economic development, efficient governance, and inclusive growth in India, and Dr. Pramod Varma, an expert in the field of digital public infrastructure, has played a pivotal role in this digital identity transformation. As the Chief Architect of India Stack, CTO of EkStep Foundation, and the Co-Chair of the Center for DPI, Dr. Varma shares how he and many others addressed various social and economic challenges while fostering innovation and connectivity in the digital age.

According to Dr. Varma, the telecom revolution laid the foundation for what would later be known as India Stack and India’s Digital Public Infrastructure (DPI). He highlights that India’s economy was relatively closed until the early 1990s when economic liberalization opened up new possibilities. One of the pivotal moments came with the telecom revolution. Dr. Varma credits the Indian government and telecom regulators for displaying “fantastic foresight” by opening up the telecom sector, leading to rapid adoption. India went from having very few phone users to over a billion in a short span.

Dr. Varma shares that a post-9/11 world led to stricter financial regulations, making it harder for people to access financial services. By 2009, India still faced challenges like low bank account ownership and limited financial inclusion. Only a small percentage of the population had bank accounts, paid taxes, or had access to financial products. Dr. Varma shared, “In 2009, India was struggling to bring formalization and financial inclusion to a billion people. In 2009, less than 17 percent of Indians had bank accounts….Very, very few people have access to financial products.”

This prompted the development of Aadhaar, a digital identity project, giving the citizens of India a unique digital identity number. Despite facing initial skepticism on the achievability of such a large-scale project, Aadhaar successfully provided digital identity to over a billion people in less than seven years. This achievement instilled confidence in using digital means to promote financial inclusion, health access, and education.

In 2015, Prime Minister Modi launched the Digital India Mission, recognizing the power of digital technologies to drive financial inclusion, health access, and education. This mission provided the policy framework for various components of India Stack, including DigiLocker for credentialing, e-sign for digital signatures, UPI (Unified Payments Interface) for payments, and a robust data infrastructure. Within eight years, India saw a transformation from just 17 percent of its population having bank accounts to nearly 90 percent access.

Dr. Varma highlights that India’s digital transformation was characterized by its nonlinear nature. Instead of incremental changes, the country compressed its digital infrastructure rollout into a relatively short span. This approach allowed India to make significant strides in a diverse democracy with federal structures.

Digital foundations: Identifying friction points

Dr. Varma credits the success of India’s digital transformation journey as being grounded in identifying critical friction points in delivering public services. The country recognized that to achieve inclusion and efficiency, it needed to address three core challenges: presence, paperless transactions, and cashless transactions.

1. Presence-less transactions: India achieved this by introducing Aadhaar, a biometric identity system that enabled presence-less authentication, eliminating the need for physical presence in transactions.
2. Paperless transactions: To reduce paperwork, increase incentives for financial institutions to serve ‘micro-customers,’ and facilitate digital transactions, India implemented digital signatures and credentialing mechanisms, allowing citizens to digitally sign documents without the need for physical paperwork.
3. Cashless transactions: UPI, India’s Unified Payments Interface, transformed the predominantly cash-based economy by enabling digital payments. The system’s success led to a dramatic increase in digital payments from 30-50 million people to 500 million users today.

Dr. Varma identifies three significant challenges faced during Aadhaar’s rollout:

1. Political and bureaucratic acceptance: Convincing various government sectors to adopt a single digital identity as a foundational element for their services was a significant challenge. Each sector often worked in silos, making coordination difficult.
2. Privacy concerns: As Aadhaar collected biometric data for a billion people, privacy concerns needed to be addressed. It took several years to address these concerns, focusing on data minimalism and well-contained purposes.
3. Technological and rollout challenges: Building a unique identity system for a billion people using commodity computing and managing the rollout across diverse linguistic regions posed immense technological and implementation challenges.

To overcome technological challenges, Dr. Varma and his team adopted several strategies, including:

1. Collaboration: India engaged in extensive collaboration with industry experts and organizations like Microsoft, drawing inspiration from their successes in scaling digital solutions.
2. Minimalism: Aadhaar adopted a minimalist approach, only collecting essential data attributes, which simplified the system and reduced privacy concerns.
3. Ecosystem thinking: India leveraged an existing ecosystem of village-level entrepreneurs and local partners to assist with the rollout, ensuring they could operate comfortably in their native languages and cultural contexts.
4. Open source and commodity computing: The entire system was built on open-source software and open APIs, utilizing commodity computing to keep costs low while ensuring security.

The concept of Digital Public Infrastructure (DPI)

Dr. Varma characterizes Digital Public Infrastructure (DPI) as a fundamental shift from traditional approaches to digitization. Dr. Varma explains that DPI emphasizes interoperable building blocks rather than complete solutions. It aims to create an inclusive digital ecosystem where the government, civil society, and the private sector work together to solve problems efficiently, offering a path to economic growth. Dr. Varma explains the questions that are top of mind as India looks to the future” “If the society is going to live in a digital realm mostly, why are we not thinking digital infrastructure? And what does it mean to think digital infrastructure? Can we create digital infrastructure on top of which market can innovate faster, cheaper? And when market innovates faster, cheaper, can we create inclusion as a side effect of innovation?”

EkStep Foundation

Dr. Varma is currently the CTO for EkStep Foundation, which aims to address India’s education and skilling needs through digital public goods. EkStep’s efforts include the creation of DIKSHA, one of the world’s largest digital infrastructures for education, which is accessible to over 200 million children. Additionally, the Center for Digital Public Infrastructure (CDPI), co-chaired by Dr. Pramod Varma, is a recent initiative designed to assist other countries in their digital transformation journeys. CDPI seeks to pool knowledge, assets, and market readiness to enable countries to embark on their own digital public infrastructure projects.

Dr. Varma concludes with a call for collaboration. “I hope this inspires people to create their own journey for their own countries. But one thing is very clear, unless we come together and hold hands … one government can’t solve, one small civil society can’t solve, one private company can’t solve. It’s a collective effort that we need to put together, so that every country can build the next 20, 30 years in a digital economy.”

To find out more:

• Learn more about how Microsoft supports digital identity
• Learn more about Microsoft in Government
• Learn more about India Stack on their website
• Find out more about the EkStep Foundation on their website

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