A solid foundation enabling market innovation worth $100B in India

A solid foundation enabling market innovation worth $100B in India

A robust digital engine has paved the way for India’s rapid digital transformation fuelling most startups as well as big and small businesses. It is now being extended to make India AI ready.  

Access to data and digital transformation is driving key innovations in India. Nandan Nilekani, the architect behind today’s digital India, breaks down the foundational structures of India’s digital transformation and the way forward at the Avataar Venture Partner’s Annual General Meeting, held earlier this year, in Bangalore. 

Much like the internet itself, he believes innovations in India are a result of combined efforts between public and private entities, starting with the Digital Public Infrastructure (DPI) which acts as a building rail that everybody can use to innovate further. 

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Public rails, private innovation

The foundation of tech innovation for public use in India began with creating digital identities or Aadhaar, according to Nandan, who led the project for the Government of India for five years. Today, 1.3 billion people have this digital ID and the tech is about 80 million times a day for identity verification.  

This is accompanied by another layer of product called Know Your Customer (KYC) which dramatically reduced the time of opening a bank account in India from several days to two minutes with internet connection. It drove financial inclusion with more than seven million bank accounts linked to digital ID today from almost not having any digitally-linked bank account a decade back. 

In 2016, when Reliance Jio launched their mobile network, the use of electronic KYC made it possible to onboard 100 million customers within 6 months which would not have been possible in the traditional way. As a result, the cost of data went down while smartphone penetration increased. 

In the same year, Unified Payment Interface (UPI) entered the picture and became the foundation for India’s robust digital payment ecosystem today. Built by the NCPI, UPI is a real-time payment platform that makes transferring money from one bank account to any bank accounts easy through smartphone, irrespective of any payment app. 

‍With 350 million individuals and 50 million merchants using UPI regularly, UPI enables about 12 billion payments every month.

During the pandemic, these public rails proved to be highly useful for the education and healthcare industry as well. Through an app called Deeksha, students could scan a QR code on their textbooks for each lesson. Public hospitals, too, could carry out registrations successfully online to reduce waiting times for patients and maintain social distancing.

The ease of conducting financial activities online has also brought more and more Indians in the capital markets. Another interesting by-product of the tech infrastructure is that it has resulted in an increase in tax revenue (4.06X) which is growing at a faster rate than the country’s GDP (3.58X). 

In fact, many private companies have built valuable businesses across payment, commerce, logistics lending, and mobility, among others, by leveraging the tech infrastructure, leading to huge market growth. Redseer Consulting estimates about $100 billion of value has been created on top of DPI. 

“This has become so popular that there is a huge global movement to take the concept of Digital Public Infrastructure to the world. We are taking it to 50 countries in five years through a program called 50 in 5,” Nandan says. 

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Unifying the market for efficiency

The market in India is highly fragmented with millions of retailers and millions of people who own only one or two trucks, and even more farmers who own tiny plots of land. Such small players in the same sector are brought together through open networks.

The Open Network for Digital Commerce (ONDC) brings all the market actors in the goods and food market together, recording about 6.5 million orders every month. The network allows the smallest retailer or food stall to participate equally as the biggest restaurants or retailers. 

In the energy sector, Unified Energy Interface (UEI) is the open protocol that enables an interoperable EV charging network. It connects all the networks and a user can now go to any charging station. 

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Making India AI-Ready 

‍The investment in DPI in the last 15 years has actually laid the foundation for AI usage. “Everything we do will now be amplified with AI. It is only going to accelerate what has already been done. We are looking at how we can use the power of AI to enable everyone to get access to whatever tools, co-pilots applications so they can improve their life,” he said, adding that the plan is to enhance human potential with AI through the DPI approach. 

Nandan emphasized that the focus remains on developing use cases to put all that has been built to use in real-life scenarios. For that, a lot of work is being carried out to create smaller models.

While a lot of data is being generated, it does not help build AI for India. Scraping the internet for data, as done by most companies in Silicon Valley, does not solve our problem because the data we have is all in English. 

There is a need for local language data, used by people not there on the internet. “We need our own ways of collecting data relevant to our business situation and that's a lot of work that needs to be done on creating a new kind of data,” he explained.  

The government is now building open source models that companies can use for data collection, inference platforms, or other tools to ensure that building AI for a billion people does not come at a heavy cost. 

The challenge is to capture how Indians actually speak including habitual mixing of more than two languages like English, Tamil, Hindi in one sentence. 

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At present, there’s a standardized process to gather spoken data from 400 districts which will be open sourced for all. A startup looking to launch their service in 22 spoken languages can make use of it. This, Nandan emphasized, is how AI infrastructure is getting built in India as Digital Public Intelligence (DPI).