February 9, 2018 / 1:32 PM / in 10 months

Commentary: In defence of India's ID infrastructure

India has put in place a national ID known as Aadhaar. The absence of an ID was used by bureaucracy to deny citizens access to what was rightfully theirs. The unique ID was also pushed as a measure to reduce corruption and waste in the country’s welfare programmes, where 40 percent or more of payments enriched corrupt officials and contractors.

Village women stand in a queue to get themselves enrolled for the Unique Identification (UID) database system at Merta district in Rajasthan February 22, 2013. REUTERS/Mansi Thapliyal/Files

The idea for Aadhaar came from India’s  IT industry; its prominent advocate was Nandan Nilekani, one of the founders of Infosys. The country’s previous prime minister, Manmohan Singh, became a convert. He invited Nilekani to head the team to implement Aadhaar.

Nilekani met with opposition from various units in India’s byzantine government. The programme was launched by stealth. Enrolment of individuals and creation of the database proceeded on a “voluntary” basis without any law being passed. It is to the credit of the new Modi government that they embraced what they should in Indian tradition have jettisoned as a “Manmohan” idea. They too found it difficult to obtain legislative consent. The law authorising a national ID was positioned as a “financial” legislation involving welfare payments, enabling the government to bypass the Indian parliament’s upper house.

The scale and complexity of the achievement is breathtaking. Quietly, below the radar, even without having a law to back it, a unique comprehensive biometric ID has just “arrived”. No other country has anything remotely resembling India’s Aadhaar with 1.2 billion names, 1.2 billion addresses, 1.2 billion photographs, 2.4 billion irises and 12 billion fingerprints. The biometric backbone eliminates ghosts, the bane of systems like the U.S. Social Security one. The system has been kept simple. Everyone gets an ID number, not a card that can be duplicated. Peter can have Paul’s card, but Peter gets no benefit; he can never pretend to be Paul.

While the focus has been on reducing fraud and waste, what is forgotten is that Aadhaar has enabled a digital leapfrog. Indian banks have dropped the cost of opening new accounts to pennies. The multi-week, paper-intensive, multi-signature KYC (Know Your Customer) process is now over in seconds with a low-cost device that captures a customer’s iris. They are now able to move amounts as low as 15 cents in near real-time at a small profit. These productivity gains may be making India’s retail financial sector the most cost-effective in the world. This might be why Indian banks have the highest market-to-book value ratios.

Aadhaar can prevent ghost payments; it is not a panacea for all  issues in the last-mile delivery of welfare services. The system has rejected legitimate payments to individuals because their fingerprints were worn out, because internet connectivity was poor and because some bureaucrats are now trying to find ways to beat the system. This has resulted in some cynicism developing over Aadhaar. It is this writer’s contention that these problems are not related to Aadhaar itself, but due to infrastructure issues or residual bad processes.

Instead of responding to the complaints with sensitivity, many state governments are resorting to tyrant proclamations - “If your ID does not work, it’s perfectly OK for you to starve”. This silly approach could derail one of India’s most significant technological achievements. One hopes that better sense will prevail and that genuine problems are sympathetically dealt with. Aadhaar is supposed to save money AND empower citizens.

In order to improve its tax collections (India has a very low tax-to-GDP ratio), the government has been trying to eliminate ghost bank accounts. This involves linkage of bank accounts to unique IDs. Obviously, this is resisted by tax evaders; privacy and resistance to the big brother, are useful slogans and arguments for tax evaders to make, especially citing data security issues.

A prominent story in the Indian media is about how someone managed to get hold of thousands of Aadhaar cards. Iago said, “who steals my purse steals trash”. Who steals my Aadhaar card steals less than trash. There is nothing you can do with my Aadhaar card unless you can also kidnap me, cut off my fingers, pluck out my eyes. Data leaks — when a credit bureau or a bank or a search engine gets hacked into — happen in countries where there may be no unique national ID.

One can only hope that the Indian government is able to prevail over last-mile saboteurs and skeptics, and make this platform a successful one.

About the Author

The writer is a Mumbai-based entrepreneur. He has been associated with India’s IT industry and was the former chairman of NASSCOM. The views expressed in this article are not those of Reuters News.

The views expressed in this article are not those of Reuters News.

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