Foreign direct investment continues to pour into India’s financial sector despite global trade tensions and domestic challenges such as account inactivity and inequality. This reflects investor confidence in India’s digital transformation, which is turning its 1.4 billion citizens into a scalable, data-rich market. IOL media outlet reports.
Although US tariffs under Trump trimmed India’s GDP growth slightly, the domestic-focused financial sector remained resilient. Nearly 89 percent of adults now have bank accounts, compared with just 35 percent in 2011, thanks to the government’s 2014 digitisation push. However, around a quarter of these accounts remain dormant due to poverty, literacy gaps, and rural isolation.
Fintech innovation is bridging these divides. Firms like Paytm and PhonePe use India’s Unified Payments Interface (UPI) and alternative data, such as mobile activity, to assess creditworthiness and offer microloans, insurance, and savings products to low-income users. Major investors — including Citigroup, Barclays, and MUFG — are expanding through such data-driven products.
India’s shift from an informal cash economy to a formal, data-based system has created a new investment frontier. The Reserve Bank of India’s Financial Inclusion Index has climbed to 67, reflecting gains in access and quality of services. Public-private partnerships, highlighted in the U.S. State Department’s 2025 report, underpin fintech hubs like GIFT City, which drew $20 billion in foreign investment in 2024.
India’s model carries valuable lessons for the Global South. Africa, with a population and mobile penetration similar to India’s, faces comparable challenges of dormancy and inequality. Yet, initiatives like Kenya’s M-Pesa and South Africa’s digital grants could benefit from adapting India’s layered «India Stack» framework of identity, payments, and data. India has already pledged $2 million to the Africa Digital Financial Inclusion Facility, signalling readiness for cooperation.
Despite cybersecurity and privacy concerns, India’s example shows that inclusive digitisation reduces costs, increases financial activity, and attracts FDI — over $50 billion in 2024–25 alone. The transformation of its unbanked population into a formalised digital market proves that with the right policies, demographics once seen as a burden can drive economic strength.
For developing nations, the takeaway is clear: build digital infrastructure, incentivise account activity, and treat inclusion as national strategy. India’s experience demonstrates that a digitally empowered population forms the foundation for resilient, sovereign economic growth — and that the true defence against global volatility lies in domestic digital strength.
