In such a diverse economy, where welfare subsidies involved lots of paperwork, and there were difficulties in individual identity verification, the Indian government embarked on developing a digital infrastructure to assist efficient development. Thus, India Stack was formed, step by step.
The first component is Aadhaar.
Aadhaar, with its 12-digit unique identity number, has been taken up by 1.3 billion people (as of March 2022). The provided number is linked to the resident’s basic demographic and biometric information, such as a photograph, fingerprints and iris scans, which are stored in a centralized database.
The second component of the India Stack was the digital payments infrastructure, built by the National Payments Corporation of India (NPCI) and launched in 2016, called the United Payments Interface (UPI). In March 2022, the NPCI recorded 5.4 billion transactions.
The third component, the Account Aggregator framework, went live in 2021 through eight banks. This is a secure, consent-based data-sharing framework.
India Stack itself says ‘Where Aadhaar first helped seed India’s economy with hundreds of millions of new economic participants with bank accounts, UPI then gave those account holders an easy and cheap way to transact digitally. In a similar fashion, the third layer of India Stack helps those same account holders to leverage the data trail they leave behind as they go about transacting and operating in the digital economy.”