Because of large public investments in India’s digital infrastructure, India is rising as a digital superpower. Given the country’s unique context, this gives way to a unique Indian Stack that will radically transform India’s economy and society.

Our observations

  • Telecommunications company Reliance Jio has the aim to make digital services accessible for all Indians, and is offering cheap data across India: for Rs 149 (around $2), consumers buy up to 3 GB of data, and 3 GB data bundles including free calls are sold for Rs 198 ($2.80) a month. The company has also partnered with other companies to provide “digital oxygen”, such as the “WhatsApp Plan” that allows unlimited usage of WhatsApp and Facebook across India at a fee of Rs 16 ($0.20) per month. Mostly because of Reliance’s efforts, India will have nearly universal 4G coverage in the near future, after years of slow internet speeds and very low internet coverage.
  • As a result, video-streaming on Indians’ smartphones has increased 10-fold in the past three years, making the country YouTube’s biggest audience in 2018. Indian smartphone users now download about 8.5 gigabytes of data per month, more than users in the U.S., China or Japan.
  • India had the fastest growing large e-commerce market between 2013 and 2017, and Amazon expects the number of online shoppers in India to triple in the next few years. India’s middle-class will grow to 540 million by 2022, and more than 80% of its new customers in 2018 came from outside India’s biggest cities.
  • The number of Indian unicorns increased from four in 2014 to 13 as of January 2019, ranking it second after the U.S., China and the U.K. Of these, 12 are directly related to India’s digital consumer economy (only ReNew Power Ventures, a renewable energy company, cannot be categorized as such).
  • We have written before on how India’s demonetization move would be a push for its financial inclusion and fintech industry. Since then (November 2016), data from the Unified Payments Interface (a cross-Indian platform for sending money between banks and financial institutions) shows that the volume (602x) and amount (271x) of online payments has exploded (as of December 2018). Furthermore, the number of Jan Dhan accounts (i.e. low cost bank accounts under India’s Pradhan Mantri Jan Dhan Yojana financial inclusion campaign) has reached up to 355 million, with a big increase in both the number and amount of deposits since the demonetization move. Indeed, India has made large gains in the World Bank’s Financial Inclusion Index. Digital mobile wallets (e.g. Patym) have seen their user base surge as well.
  • A report by Nielsen found that the average spend on smartphones in India has risen by 30% in the last two years, from Rs 7,700 ($108) to Rs 9,960 ($140). Still, that is far below the global average smartphone price of $363. The number of Indian smartphone users will increase to 829 million by 2022, up from 404 million in 2017. As many Indians own a smartphone before owning a laptop or computer first, India can be considered a “mobile-first country”.

Connecting the dots

In July 2015, the Modi government launched the Digital India campaign to create an integrated Indian digital infrastructure, with the three goals of improving India’s digital infrastructure, providing e-government services to Indian citizens and digitally empowering citizens. Since then, a unique “India Stack” is emerging that boosts India’s digital economy and enables its consumers to leapfrog into new business and consumer practices.
The foundation of India’s Stack is Aadhaar (which literally means “foundation” or “basis” in Indian languages): a system that assigns every Indian a unique 12-digit number on the basis of biometric information (iris and face scans, fingerprints). Launched 10 years ago, it currently has 1.232 billion Aadhaar IDs, making it the largest non-U.S. technical system in the world. Since 2014, the Jan Dhan financial inclusion program has been using Aadhaar’s biometrically-verifiable ID system to give Indians access to official banking and insurance systems. On top of that came mobile payments, boosted by India’s rapid smartphone adoption, cheap data and high-speed internet coverage by Reliance Jio’s, as well as India’s demonetization “shock therapy”. These layers – identification and documentation, payments, and transactions – are dubbed the “JAM trinity”.
The India Stack is rapidly expanding, as India’s (democratic) government continues to invest large amounts to improve and extend its digital infrastructure, such as in the BharatNet project to provide broadband internet to rural India, the Meghraj Cloud Initiative to provide pan-Indian platform-, infrastructure-, and software-as-a-service solutions, as well as India’s Smart Cities Mission to develop 100 smart cities with high-speed mobile internet coverage. What’s especially interesting about these initiatives is that they are driven by the Indian government, making India’s Stack a public project with a clear focus on creating social value (instead of corporate value as in the U.S., market-centrist approach, or the controlling and censoring approach of China’s governmental approach). This translates in a proliferation of Indian e-governance services, such as eTaal (digital interface for government subsidies and welfare programs), Digilocker (1GB free space to store important documents, such as passports and health records), eHospital and eSushrut (information systems for online healthcare and insurance), eNam (online trading platform for agricultural products of poor farmers across India), Jeevan Pramaan (pensioner services), and the MyGov.In platform to access and address local government issues. The India Stack has greatly reduced transaction costs and corruption for a wide range governmental services (e.g. schooling subsidies, welfare transfers).
Furthermore, Indians have a large say over their own data ownership and privacy, as many services require Aadhaar but aren’t allowed to sell or transfer Aadhaar data, and many

Aadhaar services create anonymized virtual IDs that temporarily link Aadhaar to a service. Furthermore, commercial parties are under direct governmental oversight and must ask for explicit consent from Indian consumers before using and sharing their data. To protect and manage the privacy and sharing of data of Indian citizens, India recently set up regulation for new entities (account aggregators). Lastly, because the India Stack is built on several public and open APIs, it is an open playground on which parties can develop platforms and applications that leverage the huge data from India’s economy and billion-plus society, in contrast to the closed or “walled gardens” elsewhere. All these design principles will make Indians data-rich before they become economically rich.
Commercial services are flourishing as well by leveraging the India Stack, such as e-commerce, video streaming, online payments, as well as social networks and Indian startups. For example, ESign is a recent addition to Aadhaar that provides online electronic signature services, enabling Indians to pay, identify and verify documents digitally. This enables Indian consumers to leapfrog into new consumers practices, such as rural e-commerce consumers to pay by means of iris scans or citizens to verify official documents with their fingerprints. And given India’s unique user, which is still relatively poor and illiterate as well as young and rural, the other layers of the India Stack are unique as well. For example, the Indian interface is heavily reliant on speech and voice, as many Indians cannot write or read, making video services essential for Indian consumer adoption. Amazon, for example, has modified its app and customer conditions and added Indian videos for those who cannot read, and it has opened physical Amazon stores to walk people through the process of ordering and searching online. Another example is that “light browsers”, such as Alibaba’s UC Browser, and apps that use little data and storage on smartphones, such as SHAREit, are doing better than applications that are popular in the developed world because of the basic smartphones used in India.
These examples show that the India Stack provides a unique digital model that generates huge leapfrog potential for Indian consumers, citizens and companies. And it functioned also as the prerequisite for the most important reforms of Modi’s term: the demonetization move and the digitization and standardization of India’s tax system in 2017 (India jumped 65 places in the Ease of Doing Business Index during Modi’s term, and 30 places after the demonization and tax reforms). If Modi wins a second term in the upcoming May elections, India’s emerging Stack will become the backbone of further reforms that come on the back of the India Stack, which will greatly reduce transactions costs and boost the efficiency of India’s regulatory environment (e.g. a basic income).

Implications

  • Given the focus on accessible interfaces and “light” applications for Indian consumers, Indian companies might come to develop innovative new interfaces and applications for the developing world. Furthermore, considering India’s recent soft power push of promoting itself as the spiritual leader of the world and the recent backlash against digital technology from China, India’s media companies have the potential to win the hearts and minds of consumers worldwide (e.g. guru MOOCs, Bollywood social media).
  • We have written before how new regulation is hurting the entrance of foreign companies in India, possibly boosting the position of Indian “mom-and-pop” stores, who are still responsible for the bulk of India’s retail sales. Likewise, the demand for singe-brand retailers that are more than 51% foreign-owned to buy at least 30% of their manufacturing materials has pushed Apple to build its iPhones in India. In other domains where foreign tech companies dominate, such as online advertising (Facebook and Alphabet) or video streaming (Netflix, YouTube), social messaging (WeChat, WhatsApp, TikTok), similar regulation can be expected that will boost the position of Indian tech companies to leverage the country’s huge scale and data potential. Given the dominance of Chinese apps in India’s ecosystem, there might even be a geopolitical reason to create “Indian digital champions”.