India's Aadhaar ID project turns nation's poor into economic players

Here in the small village of Ambalavayal, in southern India, in a large dim room beside the local school, about 30 villagers sit patiently on benches.

Young mothers in bright saris with babies on their shoulders. Old men with the dust of the fields on their clothes and coarse work-worn hands.

At rough wooden tables, a jumble of cables connect laptops to fingerprinting machines and eye scanners, and one by one the villagers step forward to be fingerprinted, scanned and photographed.

By being catalogued this way — which would be fiercely resisted by people in the privacy-conscious West — each villager is becoming a part of what has been called the biggest social project on the planet.

The project itself is called Aadhaar, which means foundation, and it has the potential, its proponents believe, to transform India and shift economic power from the hands of the wealthy few to the (potentially) consuming many.  

As most of us now know, India has become something of an economic juggernaut over the past decade.

In fact, its growth rate this year is expected to be nearly triple that of Canada and other Western nations.

Yet even as the Indian economy produces its annual crop of new billionaires and races ahead statistically, many people are left behind.

One-third of the population, 400 million people, lives on less than $2 a day.

Less than half of households have toilets. In even fewer can residents drink water from their own taps. One in four is illiterate.

An almost greater concern is that hundreds of millions of Indians are virtually invisible to the state.

They have no ID. They may have ration cards or election cards but no real identification.

Imagine trying to sign up for government help or open a bank account — less than half the population has one.

What's more, only about three per cent of Indians pay income tax.

Microcredit

A central purpose of the Aadhaar identity cards is to extend microcredit and micropayments to India's poor who don't have the kind of ID that banks require by law to open accounts.

The unique identification number will satisfy that requirment and is expected to lead to more branch-less, ATM banking in rural areas, where residents will be able to use their card and a biometric identifier to prove who they are. It will also allow for more designated intermediaries, such as self-help groups and local convenience stories to provide banking services.

This is where Aadhaar comes in. It is a state-organized plan to give every resident — ultimately 1.2 billion of them — a unique 12-digit identity number in which an individual's identity can be verified online, backed up by fingerprints and eye scans.

Once completed, it will be the world's largest biometric database, unprecedented in size and ambition.

A tycoon's legacy

Aadhaar is the brainchild of one of the wealthiest men in the world, Nandan Nilekani, the co-founder of Infosys, one of the giant information technology companies that have driven India's economic success.

As he puts it, "Aadhaar's transformational potential is so immense that it's worth doing. If you're able to marry the power of modern technology to solving the problems of the most deprived of people then that's a big thing."

Nilekani and others argue that simply giving people an identity number brings them into the system, into the formal economy.

It may even encourage people to ask for more government services and demand change.

Also, because the system is online, it offers mobility. It will make it easier, for example, for someone in a village in northern India to move to Delhi to look for work.

As Nilekani sees it, this is a door that opens other doors — making it easier to open a bank account or get a ration card or a driver's license. Or even a welfare cheque without having to pay off some middleman in the process.

The Indian government spends an estimated $60 billion a year on programs for the poor, such as food rations of rice and lentils.

And even the politicians here in India admit that as much as half that money never gets to who it is intended for.

It's either pilfered by sticky-fingered officials along the way, or people on the receiving end have figured out how to scam the system.

Aadhaar is designed to provide an electronic pipeline from government coffers to the bank accounts, or pockets of the poor.

It offers transactions that can be audited and verified online at both ends.

Not only would that make the whole delivery system more efficient, it takes it out of the hands of an archaic and often corrupt bureaucracy.

Big Brother?

Not surprisingly, for all the important ills that Aadhaar would cure, just the idea of this huge national database of identities has vociferous critics who worry about the hijacking of privacy, even national security.

"This is Big Brother," says Mathew Thomas, a civic activist in Bangalore who is launching a lawsuit to try and stop the project.

He thinks it is a waste of money that simply won't work. Government corruption, he argues, can't be eliminated with technology.

In fact, Aadhaar's development over the past two years has been marred at times by bureaucratic infighting, cost overruns (total projected cost is somewhere in excess of $3.5 billion) and finger-pointing.

But Nilekani, who was made a cabinet minister to oversee the project, seems to have sorted these out. Registration is voluntary and on track to sign up 600 million people by 2014 — about half the population.  

Aadhaar, though, is more than just a project to empower India's poor, or simply get them their survival rations.

Many people believe India is on the cusp of an economic revolution — along with the other so-called BRIC nations (Brazil, Russia, India and China) — that could change power relationships around the world.

While Canada, the U.S. and Europe worry about lack of young people and their abilities to support an aging population, India is youth personified: Half the population here is under 25.

In less than a decade the median age in India will be 29 while in Canada, it will be close to 40.

What that means is there's a huge, largely untapped pool of Indian workers and consumers with the increasing technological savvy and potential to change India's economy and maybe even bring more of the world's goods to its shores.

Back at that registration centre in Ambalavayal, even though people are willing, even eager to be registered, no one seems really certain what Aadhaar will mean for them.

"I'm not sure what the benefits are," one young mother says, "but it's important to have an identity, for me and my baby."

A young engineering student in Bangalore, can't be specific either but it's definitely good, he says. "You can do anything because you have identity, nobody can question who are you? We can answer, I am an Indian I am a citizen of India."

Harnessing the energy and potential of its young and its poor is, of course, India's big economic and social challenge. And Aadhaar may well be the tool to help do that, with applications that haven't been thought of yet.

Nilekani calls it an app store for development. If all of India is to succeed, a shift has to happen — and then a new and much more broadly based generation of achievers will drive its economic growth.