Opinion State should reclaim its role, shape digital markets
This public infrastructure ethos is reflected in the RBI’s recent reaffirmation that UPI will remain a zero-cost rail for users, underscoring the state’s commitment to keeping digital infrastructure open and accessible.
The presence of multiple such ecosystems may suggest competition, but this is often an illusion. Most Indians interact with digital markets shaped by sprawling digital ecosystems. These ecosystems, comprising infrastructure, data, software, and consumer-facing services, have not evolved organically; rather, they are strategically curated by dominant orchestrators. By controlling foundational layers such as operating systems, app stores and data flows, these firms shape how value flows across markets.
The presence of multiple such ecosystems may suggest competition, but this is often an illusion. These firms adopt similar exclusionary strategies, such as bundling core services with adjacent ones, controlling access to critical data flows, and limiting interoperability to lock users in. These dynamics are creating markets that are neither neutral nor contestable. As digital markets shift from competition to ecosystem control, a question arises: Can the state redesign these markets through institutional architecture rather than regulate them ex post?
India’s embrace of Digital Public Infrastructure (DPI) presents such a distinct policy response that seeks to create foundational public rails. These building blocks allow multiple service providers to plug in and innovate without dependency on a private ecosystem orchestrator. This public infrastructure ethos is reflected in the RBI’s recent reaffirmation that UPI will remain a zero-cost rail for users, underscoring the state’s commitment to keeping digital infrastructure open and accessible.
DPI is a market-shaping institution. Experience with the India Stack shows how the state can act as a catalytic anchor client, seeding two-sided markets through early adoption, ensuring institutional continuity via national information utilities like NPCI, and embedding inclusion into infrastructure design. DPI reframes the role of the state as an architect, determining conditions under which digital markets evolve.
However, DPIs may give rise to new issues that need to be preempted through effective design and checks and balances. There is a risk of re-monopolisation or re-centralisation by dominant players if they informally capture the discovery, delivery, or data layers, creating choke points for competitors. Gatekeeping may shift upward from platforms to service layers such as logistics or payment gateways. Many DPI systems are built through PPPs, where private actors may exert significant control over technical standards, often with limited accountability. These risks require institutional safeguards: Competitive neutrality, auditable openness, purpose-limited data use, and participatory governance models.
The “public” in DPI must refer not only to state provision but to open and non-discriminatory access governed by transparent rules. Even where infrastructure is public, data generated is often stored with a few private cloud providers, raising concerns about sovereignty, access, and dependencies. Studies describe this as “sovereignty as a service”, where states appear sovereign but rely structurally on private cloud and AI infrastructures they don’t control. This requires solutions such as public ownership of cloud layers, interoperability mandates, or fiduciary clauses within governance frameworks.
Existing regulatory tools provide partial protection. Data protection laws do not address structural risks such as monetisation of public data or weak oversight within concession agreements. Fragmented accountability in PPPs creates a governance vacuum, leaving no actor fully responsible for data stewardship, spaces private actors readily occupy. India’s DPI experience shows that the state can actively shape the architecture of digital markets. It can embed openness, inclusion, and contestability by design. This institutional approach not only counters entrenched monopolies today but also builds the foundations for governing the technologies of tomorrow, like AI.
By reclaiming its role as a market shaper and commons steward, the state can create an environment where innovation flourishes within boundaries aligned to public purpose. This, however, does not diminish the need for oversight.
The writers are at the ICRIER Prosus Centre
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