Something of a policy revolution is going on in India, as the country works to improve its social services and reduce government waste. Nandan Nikelani, a billionaire co-founder of Infosys, chairs the Unique Identification Authority of India, a government institution that will issue universal identification numbers to nearly everyone in India by April 2014, at the cost of some $3.4 billion. It’s issued 250 million so far, with 800 million left to go.
The purpose of the the ID system, called Aadhar, is to deliver cash transfers from the government electronically, into bank accounts. (A good 40% of Indians don’t have bank accounts yet, another issue that needs to be rectified). Why is that so important? Any number of development tools—public pensions, welfare payments, universal education, basic healthcare—require a government to know who it is helping and how to reach them. Otherwise, there’s trouble, as UK economist Tim Harford points out:
Lacking UID, well-meaning governments are forced to resort to cruder approaches to poverty reduction: grain handouts that are hijacked by well-connected middlemen; subsidised fuel that’s expensive and ill-targeted and distorts the economy. According to a World Bank report last year, Social Protection for a Changing India, the country has hundreds of official anti-poverty programmes, and many of those who enjoy the benefits are not poor.
Indeed, fraud and excess costs have consumed as much as 71% of the 12% of GDP India spends on subsidies. Just as the the United States’ required Social Security numbers to institute its own social insurance systems, so India needs its equivalent. But it’s doing the US one better using bio-identification to ensure accuracy, adopting mobile technology and internet-based platform, as well as open standards. A similar program using iris identification in the state of Andhra Pradesh paid for itself within a month, according to the Center on Global Development.
Just as important is the push for universal identification is the push to create bank accounts for India’s citizens; economic research has shown that giving people the ability to build their assets through saving can make a huge dent in poverty. Operating in grey economy, without access to even basic financial services, is a recipe for economic and social problems. “Unless you can bring these people into the formal workforce, you end up creating a group of people who are disenfranchised,” Nikelani said in a TED Talk about his hopes for India.
The challenge right now is logistical; while pilot programs relying on Aadhar kick off on Jan. 1 in 43 districts, the plan is to adopt it in 18 states by April and across the country by April, 2014. As India’s Economic Times details, there are plenty of logistical obstacles to implementing this program; it took three years for the government to assign the first 250 million, and they expect to finish the job in fifteen months. Even the initial launch was reduced due to enrollment delays, and it will be harder to rural reach the areas where many of the neediest citizens reside.
Still, the United Progressive Alliance, India’s center-left coalition government, has made the program a major priority, in part to push back against allegations of corruption.
“This will reduce leakages, cut down corruption, eliminate middlemen, target beneficiaries better and speed up transfer of benefits to eligible individuals. It will, at one go, bring in crores of people into our banking system and mainstream them into our economy,” Prime Minister Manmohan Singh said, promising to put the country’s bureaucracy on a “war footing” to accomplish the program’s goals.
Whether or not the program is fully up-and-running on time is somewhat beside the point; if Nikelani and his team can continue learning from past mistakes and resolving bureaucratic snafus, there is an opportunity to increase India’s prosperity, and teach a few lessons to developing and developed countries alike.