Views of a Nepali Economist

The Economist has an article on the Universal ID that is being championed in India by Nandan Nilekani, the co-founder of the Indian IT giant Infosys. Some highlights:

Poverty has many causes, and no simple cure. But one massive problem in India is that few poor people can prove who they are. They have no passport, no driving licence, no proof of address. They live in villages where multitudes share the same name. Their lack of an identity excludes them from the modern economy. They cannot open bank accounts, and no one would be so foolish as to lend them money.

The government offers them all kinds of welfare, but because they lack an identity, they struggle to lay hands on what they have been promised. The state spends a fortune on subsidised grain for the hungry, but an estimated two-thirds of it is stolen or adulterated by middlemen. The government pays for an $8 billion-a-year make-work scheme for the rural poor, but much of the cash ends up in the capacious pockets of officials who invent imaginary “ghost workers”.

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This month India’s unique identity (UID) scheme will enroll its 200 millionth member, having had almost none only a year ago (see article). By the end of this year, says Nandan Nilekani, a former software mogul who runs the project, the tally could stand at 400m, a third of all Indians. The scheme is voluntary, but the poor are visibly enthusiastic about it. Long lines wait patiently in the heat to have their fingerprints and irises scanned and entered into what has swiftly become the world’s largest biometric database.

For the poor, having a secure online identity alters their relationship with the modern world. No more queueing for hours in a distant town and bribing officials with money you don’t have to obtain paperwork that won’t be recognised if you move to another state looking for work. A pilot project just begun in Jharkhand, an eastern state, will link the new identities to individuals’ bank accounts. Those to whom the government owes money will soon be able to receive it electronically, either at a bank or at a village shop. Ghost labourers staffing public-works schemes, and any among India’s 20m government employees, should turn into thin air. The middlemen who steal billions should more easily be bypassed or caught.

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Companies—and their customers—stand to gain from the system too. Mr Nilekani talks of India stealing a march on other countries if firms have an easy, secure way of identifying their customers. Banks will be more likely to lend money to people they can trace. Mobile-phone firms will extend credit. Insurers will offer lower rates, because they will know more about the person they are covering. Medical records will become portable, as will school records. Ordinary Indians will find it easier to buy and sell things online, as ordinary Chinese already do. Just as America’s Global Positioning System, designed for aiming missiles, is now used by everyone for civilian navigation and online maps, so might UID become the infrastructure for India’s commercial services.

Labels: India, nandan nilekani, UID