Digital Public Infrastructure has transformed financial inclusion in India, but at a fiscal cost. Analyse.

Digital Public Infrastructure (DPI) — the interoperable, population-scale stack of Aadhaar, Jan Dhan accounts and UPI — has moved India from cash to instant payments within a decade. Its inclusion gains are real, but they rest on a payments layer that is free at the point of use and therefore publicly funded.

Dimension 1: The inclusion transformation

• Banking the unbanked: PMJDY has opened over 56 crore accounts with about ₹2.67 lakh crore deposits, 56% held by women [1] — the account base on which the rest of the stack runs.
• Payments at scale: digital payment transactions grew from 8,839 crore in FY 2021-22 to 18,737 crore in FY 2023-24 [2], because UPI costs the customer and the small merchant nothing.
• Last-mile reach: RuPay cards to Jan Dhan holders [1] and QR acceptance brought micro-enterprises onto formal payment rails, advancing SDG 8.10.

Dimension 2: The fiscal cost of "free"

• Zero-MDR transfers the bill to the exchequer: with no Merchant Discount Rate since January 2020, the Centre compensates acquiring banks through the Incentive Scheme for low-value BHIM-UPI (P2M) — ₹1,500 crore for FY 2024-25 at 0.15% per transaction up to ₹2,000 [3].
• Annual, discretionary, partial: it is a yearly grant, revisable in any Budget, and covers only small-value payments — high-value volumes remain unremunerated.
• Cost pushed onto intermediaries: banks and payment service providers absorb settlement, uptime and fraud-control costs, which the Standing Committee on Finance warned can crowd out cybersecurity investment [4].

Dimension 3: Reassembling the trade-off

• The Committee therefore asked the Department of Financial Services to explore a self-reliant, tiered revenue model while deepening usage in Tier 3–6 cities [4].
• A threshold-based MDR shields small merchants, but a rupee-fixed cut-off catches more transactions as prices rise, and pass-through could push large merchants back to cash.
• Parliamentary scrutiny is the right forum for this choice, though committee effectiveness is limited by attendance of roughly 49% [5].

DPI's inclusion dividend is a public good worth paying for; what is unsustainable is funding it through an annual, uncertain grant. A published yearly statement of UPI's operating cost and the subsidy gap, a periodically reviewed threshold, and continued zero-cost small-value payments would keep the poorest on the network while placing the system on a durable financial footing.