How UPI becomes an instrument of India’s digital infrastructure diplomacy

Nonetheless, the development raises a larger question: how has UPI become the backbone of the country’s digital payments, and how has it laid the ground for India’s emerging digital infrastructure diplomacy?

From UPI to digital diplomacy

Ever since its launch on April 11, 2016, UPI transactions registered exponential growth in India and other countries. Between FY 2021-22 and 2025–26, UPI transactions jumped from 4,595.61 crore (worth Rs 84.16 lakh crore) to 24,161.69 crore (worth Rs 314.23 lakh crore).

Similarly, between 2022 and 2025, UPI transactions done anywhere outside India rose from a meagre 180 transactions to more than 7.5 lakh transactions (a 20-fold increase). Against this backdrop of UPI’s growing significance, the International Monetary Fund (IMF) recognised it as the world’s largest retail fast payment system by transaction volume. India alone now accounts for close to half of all real time payment transactions made anywhere in the world. 

This massive operating scale also signifies how UPI, beyond setting a global benchmark in the digital economic landscape, has laid the ground for India’s emerging digital infrastructure diplomacy. Before digging into its growing international relevance, let’s examine how and why the system was conceived. 

How India built UPI for scale and exportability

Launched by the National Payments Corporation of India (NPCI) under the Reserve Bank of India’s regulatory oversight, UPI was conceived to solve a domestic problem of a highly cash-dependent economy running on fragmented payment systems that were not interlinked. 

India faced three specific constraints:

1. A banking system comprising hundreds of institutions of different sizes.

2. A payment interface that had to stay neutral among them.

3. A user base for whom even a rupee per transaction was too much.

How India solved that problem is what made the solution exportable later. One of the most consequential steps was constituting NPCI as a not-for-profit utility – as an operator owned by all banks collectively. This ownership system helped secure a degree of neutrality that regulation alone wouldn’t have. 

Had such a system been built by a dominant bank or a private platform, it would have been no less successful at home and no more transferable abroad. NPCI’s collective ownership anchored its transferability and credibility as a public utility. Running on a single shared standard, it produced an open, modular payment system with near-zero user cost that other developing economies could easily adopt. 

From exporting service to exporting a model

What turned a portable architectural solution into larger adoption was a partnership framework built in it, which developed and evolved in three broad phases, with each phase answering the limits of the one before it. The first phase saw emphasis on service-based bilateral expansion of UPI, when countries like Singapore linked its PayNow system with UPI for remittances in both directions as early as 2023. 

As of 2026, France, Nepal and six countries have enabled UPI acceptance arrangements, allowing Indian travellers and diaspora to make payments at local merchants. But since national payment systems differ in their standards or business processes, each corridor demanded its own technical integration, regulatory alignment, and legal negotiation. Such bilateral linkages cannot be scaled, and the strategy would have exhausted itself in a dozen countries. 

Hence, the second phase addressed this constraint by shifting the focus from exporting UPI as a service-based system to promoting a broader concept of Digital public infrastructure (DPI). India’s G20 presidency in 2023 pushed the project well beyond app expansion. DPI was written into the New Delhi Leaders’ Declaration (NDLD) and carried the pitch to 123 countries at the Voice of the Global South Summit in 2024. 

Defining the project as a broader framework went further than  negotiating individual payment linkages with each country. India then backed the concept with institutions, housing it in the Global DPI Repository and funding pilot implementations across low- and middle-income countries through the Social Impact Fund (SIF).

Connect, build, share: India’s digital infrastructure playbook

The third phase is focusing on building this capability further by transferring not just the technology but also the ability to build and operate such systems. This capacity transfer has taken three different modalities, namely connecting, building, and sharing, each evolving through different kinds of partner institutions/institutional partnerships. 

For countries with existing payment systems, India connects those systems so that a cross-border transaction reaches its destination in about a minute. When the RBI joined Project Nexus alongside the Bank for International Settlements (BIS) and the central banks of Malaysia, the Philippines, Singapore, and Thailand, each operator could make a single connection to a shared platform rather than building a custom link for every new country.

The second modality is building. In countries where no system exists to connect, India helps its institutional counterparts build the entire infrastructure. NIPL has helped Namibia, Trinidad and Tobago, and Peru develop their own payment systems, with ownership of the platform resting with the respective countries. 

When Indonesia developed Indonesia Open Network, a commerce network built on the Beckn 2.0 open protocol and directly inspired by India’s Open Network for Digital Commerce, India  shared mainly the protocol  governing formats, data structures and the sequence of exchanges by which independent systems interoperate. This exemplifies the final modality – sharing – wherein the transfer is confined to a published standard and India retains no proprietary or operational interest in the resulting system. 

Similar digital infrastructure agreements with 24 countries across five regions have been signed to further global digital co-operation by enabling them to build “population-scale digital solution”.

From digital public goods to infrastructural power

NIPL explicitly says that it is helping others become “sovereign” in their payment infrastructure. Having moved from provider to partner to a setter of standards, India now transfers two things – digital public goods and the practical expertise to build foundational digital systems around them. 

In an age of datafication, these can collectively enable a developing nation to acquire a contemporary version of what the sociologist Michael Mann called infrastructural power. Mann distinguished this from despotic power as the commanding power signifying the capacity of elites to act over society without negotiation. In comparison, infrastructural power is a state’s capacity to penetrate civil society and implement decisions logistically across its territory. In other words, it denotes a state’s capacity to actually reach its citizens and deliver across its territory.

Western states built this capacity over centuries through censuses, registries and banking systems. Digital public infrastructure can compress parts of these institutions by creating interoperable digital layers at population scale: an identity layer lets a state see its population, a payment layer allows it to reach them, a data layer lets its departments act coherently.

However, this free adoption of an open payment platform architecture without conditions shouldn’t be mistaken for generosity. The European Union exports its data protection regime on account of market size, strategically through two routes. Firms serving European consumers must meet the General Data Protection Regulation. And to circumvent the cost and complexity of maintaining their own standard with GDPR, most companies apply it across their operations. 

Governments also bandwagon this separately, as aligning to European law earns an adequacy decision permitting free data flows. Brazil obtained this in January 2026. With the exception of Africa or South Asia, fewer than twenty jurisdictions hold that status, causing the data privacy laws from Brazil to Israel to now echo what Anu Bradford, an expert in international trade law, refers to as the “Brussels Effect”.

How Delhi offers a third path to digital power

While Brussels exports rules governing what may be done with data a country already holds, India is exporting a real time payment system and platform infrastructure architecture, along with the expertise to run it, which the adopting state usually owns outright. The European standard travels because a firm that refuses it loses access to European consumers, and a government that refuses it loses free data flows. 

India’s leverage rests primarily not on these threats of exclusion, but on the scale of its population and transaction volume, and household spending stays too low to make entry indispensable. Its standard travels among the global south and neighbouring countries because adopting it costs nothing and returns capacity. 

For developing states choosing between costly foreign platforms and building alone, India has offered a third path, and the reach of that offer now runs outward in widening circles, from the immediate neighbourhood to Africa, the Caribbean and Southeast Asia. Payments and identity systems have joined credit lines and trade agreements in India’s diplomatic account, facilitating its claim to Global South leadership.

Post read questions

1. UPI has evolved from a domestic payment innovation into an instrument of India’s digital infrastructure diplomacy. Discuss.

2. How has India’s experience with UPI enabled it to offer an alternative model of digital development to countries of the Global South?

3. India’s digital diplomacy is increasingly shifting from exporting platforms to building sovereign digital capacity in partner countries. Examine.

4. Digital Public Infrastructure has the potential to compress decades of institutional development into a much shorter period. Discuss the opportunities and risks of this phenomenon for developing countries.

5. India’s approach to digital infrastructure diplomacy differs from the European Union’s model of regulatory influence. Analyse.

(Shamna Thacham Poyil holds a Doctorate in Political Science from University of Delhi.)  

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