Digital public infrastructure: A dubious way to foster competition

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Subscribe to enjoy similar stories. India has been at the forefront of rolling out digital public infrastructure (DPI), with an objective of introducing a new way of governance to improve the delivery of public-service provisions.

Aadhaar, for instance, was developed to provide every citizen with a digital identity, enabling access to crucial government services and benefits. The resounding success of India’s DPI, like Aadhaar and the Unified Payment Interface (UPI), and similar platforms in other countries, like Brazil‘s Pix Payment System and Estonia’s X-Road, has spawned a global interest in DPI.

As adoption has kicked off, the core objectives of DPI implementation in India have also expanded, with an apparent shift in focus from improving governance and state capabilities to creating dynamic and competitive markets, as in the case of India’s Open Network for Digital Commerce (ONDC). Addressing competition deficiencies has traditionally been under the purview of antitrust regulators, but direct state intervention can play a legitimate role in sectors where the public interest is at stake.

For instance, healthcare, characterized by inelastic demand and high public-good potential, often trends towards natural monopolies, which makes a strong case for government involvement, either through DPI or traditional public-sector provisions. However, in sectors like e-commerce, where these conditions may not hold, the use of DPI could contribute to three main risks: inefficient allocation of state resources, potential market failures on account of government-led DPI and compromised regulatory integrity.

Consider them one by one. Addressing anti-competitive practices through government-financed DPI necessitates the use of scarce