From physical infrastructure to digital rails: India’s blueprint for Sri Lanka

Sri Lanka is not simply building another identity card. It is creating the foundation for a digital state.

The Sri Lanka Unique Digital Identity project, or SL-UDI, would use demographic and biometric information to establish a unique identity for each citizen. Government agencies and approved organizations could then verify that person digitally.

The SL-UDI could improve welfare targeting, reduce duplicate or fraudulent claims and direct limited public funds to the right people. It could also help citizens open bank accounts and access healthcare, education and government services remotely.

Digital identity does not reduce poverty by itself, but it can remove barriers to benefits, financial services and the formal economy.

The challenges facing Sri Lanka

Sri Lanka must navigate four interconnected challenges: procurement and vendor selection, a widening funding gap, control over biometric data and public trust in a foreign-influenced system.

India has committed approximately US$35 million to support SL-UDI, but proposals from qualified Indian companies reportedly came in at more than twice the grant. Sri Lanka must secure additional funding, contribute its own money or reduce the project’s scope.

Civil society groups and political figures have questioned why Indian funding, technology and contractors should sit so close to Sri Lankan citizens’ biometric identities. Two fundamental-rights petitions alleged risks to data sovereignty and national security, although Sri Lanka’s Supreme Court dismissed them without a substantive hearing.

Why is India funding another country’s identity infrastructure? Why did Sri Lanka choose an Indian-origin platform? And can India or its contractors access the data?

Why India is investing

India’s motivation becomes clearer when traced to Sri Lanka’s 2022 economic collapse.

Foreign-exchange reserves disappeared, essential goods became scarce and mass protests forced President Gotabaya Rajapaksa from office. India responded with approximately US$4 billion through credit lines, deferred payments, a currency swap and support for essential imports.

The assistance helped India rebuild its position in a country where China had become deeply embedded. But India’s support is also preventive.

Another collapse could create refugee pressure, maritime instability and security risks for India while requiring another costly rescue. It could also allow China to become Sri Lanka’s indispensable financial and infrastructure partner.

By improving welfare delivery, financial inclusion and government administration through digital public infrastructure, India hopes to reduce the likelihood of a more expensive geopolitical crisis later.

Its strategy extends beyond competing with Chinese-backed projects such as Hambantota Port and Colombo Port City. India is building connections across energy, transport, trade, digital government, identity and payments.

Why MOSIP became the foundation

Under the India-backed implementation framework, the SL-UDI will use the Modular Open Source Identity Platform, or MOSIP, while an eligible Indian company will perform the primary system-integration work.

This makes MOSIP both a condition of the funded implementation and a strategic technology choice for Sri Lanka.

Developing countries generally have three options when building identity infrastructure: develop a platform internally, license a proprietary system or adopt an open-source foundation. MOSIP represents the third route.

It offers four advantages. It avoids the cost and risk of building from scratch; it is already used by developing countries including the Philippines, Ethiopia and Morocco; it has demonstrated scale, with more than 110 million registrations across 14 national rollouts; and it has institutional credibility.

MOSIP was established at the International Institute of Information Technology Bangalore by identity specialists, with advisers connected to Aadhaar’s development and support from the Gates Foundation, Tata Trusts and NORAD.

It is not Aadhaar and does not connect participating countries to India’s identity database. It provides open-source modules for enrolment, biometric deduplication, identity issuance and authentication.

Open source, however, does not eliminate dependence. Sri Lanka still needs integrators, biometric technology, infrastructure and operational support.

Why there is a funding gap

MOSIP is open-source software, not a complete national identity system. Sri Lanka does not pay a licence fee for the core platform, but it still needs an integrator to customize it, supply data-center infrastructure, connect biometric technologies, deploy enrolment equipment, integrate government databases, test security and launch the system nationwide.

Under the Indian grant, the Master System Integrator must be an eligible Indian company. Shortlisted vendors included Infosys, Tata Consultancy Services, Protean e-Gov Technologies, RailTel and Bharat Electronics, with Infosys, TCS and Protean reportedly reaching the final evaluation.

The qualified proposals reportedly came in at more than twice the US$35 million grant. Sri Lanka must obtain more funding, contribute domestic money, reduce the project’s scope or find another source.

Implementation is only part of the cost. Sri Lanka must also fund its local Managed Service Provider, enrolment workforce, cybersecurity, data centers, network connectivity, equipment replacement and ongoing technical support.

It must invest in knowledge transfer and train Sri Lankan staff to operate, secure and modify the system without permanent dependence on the Indian integrator. Independent audits, software upgrades, citizen support and integration with new government services will add further costs.

MOSIP may be free to adopt, but building and sustaining a national identity ecosystem around it is not.

Can India access Sri Lanka’s data?

Not simply because Sri Lanka uses MOSIP.

A MOSIP deployment does not inherently transmit information to India, IIIT-Bangalore or the Indian government. Sri Lanka decides where its database is hosted, how it is encrypted and who can access it.

The integrator’s role remains sensitive. It may configure administrative accounts, encryption, biometric engines, backups and remote-support tools. MOSIP cannot determine who holds Sri Lanka’s encryption keys or what access contractors retain.

Sri Lanka must disclose where biometric data will be stored, who will control the keys, whether foreign contractors will have remote access and how privileged activity will be monitored.

MOSIP does not automatically give India access to the data, but it cannot prevent inappropriate access by itself. Digital sovereignty depends on domestic control over data, infrastructure and administrators—not the nationality of the source code.

Why India is taking UPI abroad

The SL-UDI is not India’s only digital initiative in Sri Lanka. The two governments are also expanding UPI acceptance and exploring broader cooperation on digital public infrastructure. Together, identity and payments create complementary rails for digital government and commerce.

The immediate UPI opportunity is tourism. India was Sri Lanka’s largest visitor market in 2025, contributing more than 531,000 tourists—about 22.5 percent of international arrivals. UPI lets these travelers pay participating Sri Lankan merchants through familiar applications and LankaQR without relying on cash or international cards.

The longer-term opportunity is cross-border commerce and remittances. The UPI–PayNow linkage with Singapore demonstrates the model, enabling near-real-time person-to-person transfers that can be faster and cheaper than traditional remittance channels.

Taking UPI abroad also gives India influence over payment standards, creates opportunities for Indian banks and fintech companies, and provides alternatives if foreign payment networks are disrupted. Local-currency connections can also reduce the need to route some regional transactions through the dollar.

ASEAN’s connected QR systems and Europe’s digital-euro initiative reflect the same shift toward regional payment resilience. For India and Sri Lanka, SL-UDI can establish trusted digital identities while UPI connects people and businesses to a wider regional economy.

India’s blueprint for digital regionalism

China built much of its influence in Sri Lanka through ports and physical infrastructure. India is developing a different model based on digital identity, payments and government platforms.

If SL-UDI succeeds, Sri Lanka could become India’s blueprint for other developing countries: use Indian grants to deploy open-source DPI, involve Indian integrators, retain local control over citizen data and connect economies through UPI.

Success depends on whether Sri Lanka can control its data, manage cybersecurity, sustain the system after Indian funding ends and build public trust.

If that balance works, India could replicate the approach across South Asia and the developing world—shifting its influence from financing physical assets to helping countries build the digital rails of government and commerce.

Article Topics

biometrics  |  digital identity  |  digital public infrastructure  |  MOSIP (Modular Open Source Identity Platform)  |  SL-UDI (Sri Lanka Unique Digital Identity)  |  Sri Lanka