[Answered] Examine the necessity for the State to reclaim its role in shaping digital markets. Justify how the zero-cost rail ethos of UPI reflects a commitment to open and accessible public digital infrastructure.

Introduction

As India’s digital economy expands to $1 trillion by 2030 (IAMAI, MeitY), concerns over monopolistic ecosystems, data concentration, and platform lock-ins highlight the imperative for the State to architect open, contestable, citizen-centric digital markets.

Why the State Must Reclaim Its Market-Shaping Role

1. Platformisation and Private Ecosystem Dominance: Digital markets are increasingly governed by ecosystem orchestrators — global tech giants controlling operating systems, app stores, cloud layers, data flows, and algorithmic governance. Their bundling, self-preferencing, exclusionary access and interoperability restrictions reduce competition. Studies by OECD (2023) and Competition Commission of India (CCI) show digital markets tend to become “winner-takes-most” due to network effects.
2. Illusion of Competition: Multiple platforms (e.g., Android–iOS, Amazon–Flipkart) appear competitive but follow similar strategies: Data hoarding, Vertical integration, Lock-in through default settings. Thus, competition becomes intra-ecosystem, not market-wide.
3. Public Interest Risks: Unregulated digital architectures affect: Consumer choice, SME access to markets, Data sovereignty, Algorithmic fairness. They can shape everything from credit access to mobility patterns.
4. Limitations of Ex-post Regulation: Traditional regulation—antitrust investigations, penalties, data protection laws—comes after harm, often too late in fast-moving digital markets.
   Hence, a proactive, architectural role of the State is necessary.

Digital Public Infrastructure (DPI) as a Market-Shaping Tool

1. India pioneered Digital Public Infrastructure (DPI)—digital identity (Aadhaar), payments (UPI), digital documents (DigiLocker), and data empowerment (DEPA).
2. These systems create public rails, enabling private innovation without dependence on a dominant private orchestrator.
3. The India Stack has enabled over 2,000 fintechs, while reducing transaction frictions.

State as Architect, Not Just Regulator

DPI demonstrates three foundational functions:

1. Catalytic Anchor Client – Government adoption (e.g., Aadhaar authentication) seeded early network effects.
2. Institutional Continuity – Through entities like NPCI, a non-profit public utility.
3. Design for Inclusion – Low-cost, multilingual, mobile-first design ensures accessibility.

This shifts the paradigm from “regulating after exclusion” to “designing out exclusion from the start”.

UPI Zero-Cost Rail Ethos as Proof of Public Commitment

1. Democratization of Payments: UPI’s zero MDR (Merchant Discount Rate) model ensures no user—consumer or merchant—pays for digital payments. Over 12 billion monthly transactions (NPCI, 2024). Small merchants onboarded without cost barriers.
2. Contestability and Level Playing Field: By keeping the rails open, interoperable, and free, UPI prevents the formation of payment monopolies. Allowed entry of PhonePe, Google Pay, Paytm, banks, fintech startups. Prevented dominance of card networks’ fee-driven model.
3. Public Purpose Orientation: Reaffirmation by RBI in 2024 to keep UPI zero-cost signals a commitment to: Financial inclusion, Digital equity, Market neutral design.
4. Global Recognition: World Bank (2023) calls UPI “the world’s most inclusive real-time payment system”; G20 recognises DPI as a replicable model.

Conclusion

States must shape markets, not merely regulate them. India’s UPI-centred DPI exemplifies how openness, neutrality and public purpose can govern future digital architectures responsibly.