India’s next digital challenge is fixing government data silos: TBI study

THEBUSINESSBYTES BUREAU

NEW DELHI, OCTOBER 12, 2026

India’s next major digital governance challenge lies not in building more infrastructure but in breaking down fragmented government data systems, with poor-quality information leading to welfare leakages, exclusion of beneficiaries and weaker public trust, according to a new study by the Tony Blair Institute for Global Change (TBI).

The report, titled “From Digital Scale to Data Power: A Data Operating Model for India’s States”, released on Monday, said India’s digital infrastructure had expanded at an unprecedented scale, with Aadhaar covering over 1.4 billion people and the Unified Payments Interface (UPI) processing more than 20 billion transactions a month, accounting for an estimated 49 per cent of global real-time payments.

However, the study flagged a significant gap between the scale of the country’s digital systems and the ability of governments to use data effectively for informed decision-making, better policy formulation and improved delivery of public services.

Indian states generate vast amounts of administrative data daily, including beneficiary lists, health records, land registers, school enrolments and tax filings. Yet, much of this information remains confined to individual departments and states, collected primarily to meet reporting requirements rather than address broader policy challenges, it said.

The report argued that fragmented government data is not merely an administrative inconvenience but a public service delivery problem that could undermine India’s artificial intelligence ambitions if left unaddressed.

Citing a 2025 assessment by NITI Aayog, the study estimated that poor-quality data results in fiscal leakages equivalent to 4-7 per cent of India’s annual welfare expenditure.

Past clean-up exercises underline the potential savings from better data management. Removing 17.1 million ineligible beneficiaries from the PM-KISAN farmer support scheme resulted in estimated savings of Rs 90 billion, while eliminating 35 million bogus LPG connections saved Rs 210 billion over two years. The removal of 16 million fake ration cards is estimated to be saving around Rs 100 billion annually, the report said.

The study called for a state-level data operating model to ensure that government information is reliable, interoperable and accessible across departments, enabling authorities to identify gaps, improve resource allocation and deliver services more effectively.

 “We often talk about what AI can do for the government. This paper asks a more basic question first: is the data good enough to trust an AI system, or a human official, to act on it? Right now, in most states, the honest answer is not yet,” said Vivek Agarwal, Country Director at the Tony Blair Institute for Global Change and co-author of the paper.

 “That’s not a reason to slow down on AI, it’s a reason to be deliberate about what comes first. States that get this foundation right won’t just be AI-ready, they’ll make better decisions, serve citizens faster, and catch problems before they become crises,” he added.

The report noted that India’s digital public infrastructure had already delivered significant gains in financial inclusion and access to services. Aadhaar has supported more than 24.5 billion e-KYC transactions, while formal banking inclusion rose from around 25 per cent in 2008 to over 80 per cent by 2023.

DigiLocker, meanwhile, has issued and verified nearly 10 billion documents for more than 685 million citizens.

However, the study cautioned that the availability of digital records does not automatically translate into effective data sharing across departments and levels of government. Deploying AI on fragmented or unreliable datasets could reinforce existing blind spots instead of resolving them, it said.

 “India’s first digital achievement has been a scale that few countries can match: proving that identity, payments and public systems could reach hundreds of millions of people reliably and fast. The next test is different. It is about whether data can be trusted, connected and used to deliver better outcomes,” said Ott Velsberg, former Government Chief Data Officer of Estonia and co-author of the paper.

The report’s recommendations include establishing clear leadership and institutional mandates for data governance, defining data ownership and stewardship responsibilities, adopting common standards, developing shared data capabilities and introducing independent quality assurance mechanisms.

It also called for stronger legal and procurement safeguards and the creation of a State Data Balance Sheet to help governments manage data assets and associated risks in much the same way as financial resources.

The study complements the government’s ongoing efforts to promote data harmonisation and data-driven governance, led by the Ministry of Statistics and Programme Implementation. It examines initiatives such as NMDS 2.0, the Standardised Quality Assurance Framework (SQAF), the AI-Readiness Framework, the QPR Portal and the Model Data Sharing Framework.

At the state level, the report draws on initiatives including Karnataka’s Kutumba social registry, Odisha’s Social Protection Delivery Platform and Rajasthan’s Pehchan Portal, along with programmes in Andhra Pradesh, Uttar Pradesh, Tamil Nadu and Telangana.

According to the report, states that establish robust data governance systems will be better equipped to identify emerging problems, direct public resources to those who need them most and strengthen citizens’ confidence in government information.

As India accelerates the adoption of AI in governance, the study said, the quality, reliability and integration of public data will be critical in determining whether new technologies improve service delivery or merely reproduce existing administrative weaknesses at a greater scale.