The Invisible Steel, Why Digital Public Infrastructure Is India’s Most Underrated Capex Multiplier
When Finance Minister Nirmala Sitharaman presented Budget 2026-27, the headlines were predictable and necessary. Capital expenditure scaled up to ₹12.2 lakh crore. Fiscal deficit pegged at 4.3% of GDP. Renewed emphasis on manufacturing, semiconductors, and industrial corridors. These are the traditional markers of a growth-oriented budget, the metrics by which governments are judged and opposition parties sharpen their critiques.
But beneath these headlines, something else was happening—something that barely registers in budget documents but has quietly become India’s most productive public investment of the last decade. It does not appear as a highway, a power plant, or a port. It exists instead in code, standards, and interoperable platforms. It is Digital Public Infrastructure (DPI)—the “invisible steel” that has become a core driver of India’s economic velocity.
As analysts Ravi Pokharna and Kuntala Karkun argue, Budget 2026 marks a clear turn toward technology-led growth, with funding flowing to semiconductors, AI data centres, electronics manufacturing, and cloud services. But DPI, the infrastructure that binds this ecosystem together—the rails that let chips power applications, AI reach the last citizen, and manufacturing capacity generate economy-wide gains—continues to be fragmented, undercounted, and systematically undervalued in fiscal decision-making.
The New Highways
In the industrial age, general-purpose infrastructure meant roads, power plants, and ports. These assets were characterized by high upfront costs and linear returns. A bridge serves only those who cross it. A power plant has a fixed capacity. Returns diminish as assets age and require maintenance.
In the digital age, a different kind of infrastructure has emerged. Identity (Aadhaar), payments (UPI), and data rails (account aggregator) function as the new highways. But their economics are fundamentally different. Traditional infrastructure faces capacity constraints and physical depreciation. Digital infrastructure exhibits increasing returns to scale: the billionth UPI transaction costs almost nothing to process, yet its spillover benefits for a small merchant in a Tier-3 town can be transformative.
This is the magic of DPI. Unlike a physical asset that serves only those in its immediate vicinity, digital infrastructure creates a foundation upon which infinite layers of private innovation can be built. It is non-rivalrous and nearly zero-marginal-cost. Once the code is written and the standards are set, the entire economy can use them simultaneously without diminishing their value.
The Numbers Speak
The data backing India’s DPI-led transformation is no longer anecdotal; it is structural. According to World Bank estimates, India achieved in just nine years a level of financial inclusion that would have typically taken 47 years without its digital commons. This is not incremental progress; it is a leap across decades.
The scale and velocity of payments illustrate this shift. In FY 2024-25, UPI processed 186 billion transactions with a total value of ₹261 trillion, accounting for almost half of global real-time payments. By January 2026, UPI had reached a record ₹28.33 lakh crore in monthly transaction value, cementing its position as the world’s largest real-time payments platform by volume. For millions of small merchants, UPI has reduced the cost of commerce, eliminated the friction of cash, and opened access to digital financial services.
Welfare delivery has seen comparable gains. Through the Direct Benefit Transfer (DBT) mechanism powered by the Aadhaar-linked JAM trinity (Jan Dhan, Aadhaar, Mobile), the government has cumulatively saved over ₹3.5 trillion by eliminating leakages and “ghost” beneficiaries. Every rupee saved is a rupee that can be spent on schools, hospitals, or infrastructure—or returned to taxpayers.
On the credit side, platforms such as the Open Network for Digital Commerce (ONDC) and the Open Credit Enablement Network (OCEN) are reducing customer acquisition costs for small lenders by 30-40%, allowing credit to flow to previously “unbankable” segments. Small businesses that were once excluded from formal finance are now gaining access, not because of subsidies, but because technology has reduced the cost of serving them.
The multiplier effect is striking. Government spending on core India Stack components was less than $2 billion over a decade. Yet it has facilitated a digital economy now valued at over $350 billion. Few public investments, physical or digital, exhibit this order of magnitude in return.
The Accounting Blind Spot
Given these outcomes, why does DPI barely register in budget figures? The authors identify three reasons.
First, fragmentation. DPI spending is scattered across ministries, regulators, and statutory bodies. Aadhaar flows through the Ministry of Electronics and Information Technology (MeitY). UPI infrastructure is embedded in the RBI and NPCI. Account aggregators are part of financial regulation. Platforms like CoWIN were funded as one-off pandemic response spending. No single budget head captures DPI as national infrastructure. It is everywhere and nowhere, making it difficult to track, evaluate, or optimize.
Second, diffused returns. When UPI reduces costs for merchants or Aadhaar enables faster credit disbursal, the economic gains accrue across the entire economy—not to the sponsoring department. Traditional budget accounting, which measures outputs rather than outcomes, does not recognize such spillovers. A ministry that spends money on DPI cannot claim credit for the growth in e-commerce or the reduction in cash handling costs. The returns are real, but they are invisible in the accounting framework.
Third, timing asymmetry. DPI development costs are front-loaded into a few budget cycles, while savings from reduced leakages, lower transaction costs, and private innovation compound over decades. The political cycle, which rewards visible, immediate achievements, struggles to value investments whose benefits will be reaped by future generations. The result is a systematic undervaluation of DPI in fiscal decision-making.
A Digital-First Fiscal Strategy
Budget 2026 signals intent. It allocates resources to semiconductors, AI data centres, and electronics manufacturing. But the next phase must go further. It must institutionalize DPI as infrastructure.
The first step is classification. DPI should be explicitly recognized as capital expenditure, not subsumed under routine IT or administrative heads. The government should create a dedicated “Digital Infrastructure” head within the Capital Budget, consolidating all spending on identity, payments, data rails, and interoperable platforms. This would make DPI visible, trackable, and accountable.
Second, India needs a medium-term DPI investment framework spanning five to seven years, anchored in outcome metrics rather than inputs. Transaction volumes, cost reductions, financial inclusion indicators, private innovation signals, and cross-border adoption should be tracked with the same rigour applied to highways or airports. The Economic Survey 2025-26 made this case explicitly, emphasizing that “digital infrastructure is now strategic national infrastructure.”
Third, sustainability must replace novelty. As DPI becomes mission-critical—as essential to economic functioning as roads or power grids—underinvestment in resilience and cybersecurity becomes a macroeconomic risk. Budgeting must reflect the cost of maintaining national digital rails at scale. This means funding for security audits, redundancy, capacity upgrades, and continuous improvement, not just initial development.
Finally, Centre-State coordination can be strengthened. DPI is a national public good, but its benefits are maximized when states build on it with their own applications and services. Budget 2026 rightly emphasizes cooperative federalism, but this should extend to digital infrastructure. States that invest in DPI-compatible systems—in health, education, agriculture, or land records—should be incentivized, because digitalization raises the productivity of every rupee spent on traditional schemes.
The Capex Multiplier
India will, and must, keep building physical infrastructure. The country needs more highways, ports, railways, and power plants. These are essential for growth and employment.
But the next decade’s productivity gains will increasingly come from reducing friction, not just adding assets. DPI reduces friction. It makes payments instant, welfare leak-proof, credit accessible, and commerce seamless. It is the highest-leverage mechanism for improving the efficiency of the entire economy.
Future budgets should stop treating DPI as an accounting footnote. They should start recognizing it for what it is: the country’s most powerful capex multiplier, a bedrock of the Viksit Bharat ambition, and an investment that pays dividends for generations.
Q&A: Unpacking the DPI Argument
Q1: What is Digital Public Infrastructure (DPI), and why is it compared to physical infrastructure like highways?
A: DPI refers to the foundational digital systems that enable economic activity, such as Aadhaar (digital identity), UPI (payments), and account aggregators (data sharing). Like physical highways that connect places, DPI connects people, businesses, and services digitally. But unlike physical infrastructure, DPI exhibits increasing returns to scale—the billionth transaction costs almost nothing to process, yet its benefits can be transformative. It is non-rivalrous and nearly zero-marginal-cost, making it a uniquely powerful form of public investment.
Q2: What evidence supports the claim that DPI has been India’s most productive investment?
A: The evidence is compelling. Government spending on core India Stack components was less than $2 billion over a decade, yet it has facilitated a digital economy valued at over $350 billion. UPI processed 186 billion transactions in FY 2024-25, accounting for nearly half of global real-time payments. Direct Benefit Transfer savings total over ₹3.5 trillion from eliminated leakages. Platforms like ONDC and OCEN are reducing customer acquisition costs for small lenders by 30-40%. These are not marginal gains; they are structural transformations.
Q3: Why does DPI spending not show up clearly in budget documents?
A: Three reasons. First, fragmentation: DPI spending is scattered across multiple ministries, regulators, and bodies—no single budget head captures it. Second, diffused returns: the economic gains from DPI accrue across the economy, not to the sponsoring department, so traditional accounting doesn’t capture them. Third, timing asymmetry: DPI costs are front-loaded, but benefits compound over decades, making it less visible in short-term fiscal planning. The result is a systematic undervaluation.
Q4: What does the article mean by a “digital-first fiscal strategy”?
A: A digital-first fiscal strategy means treating DPI with the same seriousness as physical infrastructure. This includes: (1) classifying DPI as capital expenditure and creating a dedicated budget head; (2) adopting a medium-term investment framework with outcome metrics; (3) budgeting for sustainability, resilience, and cybersecurity as mission-critical; and (4) strengthening Centre-State coordination to maximize DPI’s impact. It’s about recognizing that digital infrastructure is now strategic national infrastructure.
Q5: What risks does underinvestment in DPI pose?
A: As DPI becomes mission-critical—essential to payments, welfare, credit, and commerce—underinvestment in its maintenance, resilience, and cybersecurity becomes a macroeconomic risk. A failure in UPI or Aadhaar could disrupt the entire economy, much like a collapsed bridge or a power grid failure. Yet current budgeting does not reflect this. The article argues that sustaining DPI at scale requires ongoing investment, not just one-time development funding. Without it, India risks the stability of its most productive infrastructure.
