Innovation is the Essence of Digital Bharat

India is at an inflection point for the next phase of its digital revolution, building on the India Stack to the create Digital Bharat—a vision of transformative and inclusive growth. The India Stack created the foundation for digital transformation by providing digital identity, payments, and banking for all Indians. The next phase will leverage this foundation to create combinatorial innovation-where these foundational elements will be used like LEGO blocks to solve India’s biggest problems at a massive scale.

In a recent conversation with Nandan Nilekani, he described how AI is becoming the next great frontier for India. According to Nandan, India can become the global use-case capital for AI, not only in automating tasks but also in amplifying human potential. Unlike the expensive, compute-heavy models built in the West, India is taking a more frugal approach, optimising for scale and affordability. Companies like Sarvam AI and Immverse are building Indic large language models (LLMs) that eliminate the tokenisation tax imposed by Western AI models. By training models from the ground up using Indian language data, they are creating more accessible, culturally relevant AI that can serve millions in their native tongues.

To understand the power of combinatorial innovation, consider Namma Yatri, an open mobility network based in Bengaluru. Built on the ONDC framework and leveraging UPI for payments, it allows autorickshaw drivers to connect directly with commuters, eliminating middlemen and ensuring they receive 100% of the fare. The brilliance of Namma Yatri lies in its simplicity-it uses existing digital public infrastructure, but reconfigures it in a way that challenges the duopoly of traditional ride-sharing platforms. This kind of combinatorial innovation is the essence of Digital Bharat.

Finance is another sector where we are seeing second-order benefits of DPI. Microfinance institutions like Fusion Microfinance now disburse loans to millions of women digitally, reducing the turnaround time from weeks to a few days. UPI-based IPO applications have democratised access to capital markets, bringing in retail investors at an unprecedented scale. The ‘Fintonet’ model, co-developed by Nandan, takes this further by enabling tokenisation of financial assets, making investments more accessible and liquid. As capital markets integrate with these digital rails, we will witness a fundamental reshaping of how Indians save, invest, and build wealth.

Open networks are also being reimagined in commerce, where ONDC is already proving to be a formidable force against entrenched e-commerce giants. Instead of a centralised marketplace, ONDC allows any seller, buyer, and logistics provider to transact seamlessly. This creates a level-playing field for small businesses, allowing them to reach customers without having to commit to expensive hyperscaler platforms. The same principle is being applied to energy, where decentralised power grids will allow homes with rooftop solar panels and EV batteries to buy and sell power seamlessly.

Of course, challenges remain. The biggest among them is data privacy and security. While India has an enormous digital footprint that could be leveraged for AI training, care must be taken in releasing datasets for training AI models to protect privacy. Regulatory frameworks around AI, financial tokenisation, and data ownership will need to keep pace with innovation. The second challenge is ensuring that Digital Bharat is truly inclusive. While urban centres have benefited tremendously from the India Stack, rural India has been left behind. Going forward, government and the private sector must focus on infrastructure expansion, digital literacy programmes, and localised AI solutions tailored for non-English speakers.

The most pressing concern is employment. As AI automates various tasks, India must proactively think about how it can create AI-proof jobs. The answer lies not in resisting automation but in designing AI systems that augment human capability rather than replace it. Agriculture, healthcare, and education can all benefit from AI-driven insights while still retaining the need for human expertise. If we do this right, AI will be a force for job creation rather than disruption.

Looking ahead, the global potential of India’s DPI stack is enormous. The 50-in-5 initiative aims to bring India’s digital public infrastructure to 50 countries in five years. Aadhaar-inspired identity systems are already being deployed in several nations through the MOSIP open-source project. NPCI is actively engaging with other countries to expand UPI’s footprint. The next phase will see Indian fintech companies, telecom providers, and AI start-ups scaling their solutions globally, particularly in emerging markets where cost-effective, high-scale digital infrastructure is desperately needed.

Digital Bharat will be built on creative recombination of the building blocks of Aadhaar, UPI, ONDC, and AI. With careful governance, India has the potential to be a digital powerhouse for all citizens, as well as a beacon of innovation for the world.

The author is Mohanbir Sawhney, Mccormick Foundation Professor of Technology; Director, Center for Research in Technology & Innovation, Northwestern Kellogg School of Management.
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