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Guest Columnist Opinion

Identification proof to boost India’s economy

By Nandan Nilekani

The Indian economy has seen rapid growth in the past decade. Simultaneously, there has been an increased focus on the welfare of the marginalized sections of Indian society and, as a result, the government has spent more money on entitlements and subsidies. There is a need to streamline government expenditure, as well as to stop leakages and ensure a transparent and accountable system of public spending, while simultaneously empowering the poor and the marginalized.

Towards this end, the Government of India has launched a project, administered by the Unique Identification Authority of India (UIDAI), that aims to provide every resident with a unique ID number, or “Aadhaar,” that will allow easy access to a range of government and private-sector services.

Before the launch of Aadhaar, millions of Indian residents, especially the marginalized, lacked nationally valid and reliable proof of identification. This made it hard for them to do essential things like open a bank account, get a mobile connection, and access social entitlements. The increasing mobility of labor, from village to city and between states, made the problem more acute.

Now, with Aadhaar, people have an easy means of proving their identity. By the end of 2013, the UIDAI will have issued half a billion unique, lifetime-use ID numbers. This number is expected to rise to 600 million sometime in 2014, and to continue to grow in the years ahead. The scheme is voluntary, but its advantages are so obvious that more and more people will want to enroll.

People can register at any of 25,000 enrollment stations across India. The UIDAI records registrants’ address, age, and gender, scans their iris and fingerprints, and takes their photograph. This digitized, encrypted information is then sent to a central database, where it is cross-checked to avoid duplication. Once the information has been verified, the system issues a unique 12-digit number that can be used for online identity authentication.

The immediate benefits are considerable, but since the Indian government has developed this as an open-source technology, it is expected that many as-yet-unforeseen applications will emerge.

Giving Indian residents a way of proving their identity will address a range of issues. By bringing millions into the formal economy, UIDAI will drive economic growth and reduce poverty.

Even today, some 40 percent of Indians do not have bank accounts, often because they lack personal identification. A large amount of household wealth is thus stored in the form of cash and jewelry. Mobilizing this dormant capital will have a substantial impact on economic growth.

Having an account linked to one’s Aadhaar number also enables the transfer of money from the government in an electronic, auditable, and convenient way. Individuals can use their Aadhaar number and biometric authentication to withdraw cash from any retail outlet with a point-of-sale device.

The Aadhaar project has broad implications for India’s development agenda, as well. The federal government spends more than $60 billion annually on such entitlement programs as scholarships, job guarantee programs, widow and disability pensions, food and energy subsidies, health service delivery, and insurance. Now, funds can be directly remitted to beneficiaries’ accounts based on the Aadhaar number, eliminating potential fraud and waste of resources caused by system inefficiencies. Transparency and accountability are top priorities for the Indian government, and the UIDAI effectively addresses both.

Looking ahead, this program will provide all Indian citizens with identification that will grant them access to various public and private services. This will not only empower the poorest of the poor, but will also provide “pathways out of poverty,” as the government will be able to monitor access to services such as health care, education, food, and banking for the 1.2 billion people of India.

nandan nilekani (2)Nandan Nilekani is a Cabinet Minister in the Government of India, and the Chairman of the Unique Identification Authourity of India (UIDAI). He was also the co-chairman of the board of directors of Infosys Technologies Limited, which he co-founded in 1981. Nilekani was named “Asia’s Businessman of the Year” by Fortune Magazine in 2003.

This article first appeared in

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