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Business News/ Opinion / Why India needs Aadhaar

Why India needs Aadhaar

Biometric cards can help transfer welfare benefits with minimal leakages

Illustration: Jayachandran/MintPremium
Illustration: Jayachandran/Mint

The results of a recently published study on the impact of biometric cards in Andhra Pradesh should help dispel some of the most severe criticisms surrounding the ambitious programme of the Union government to issue Aadhaar or unique identity numbers to every Indian based on biometric details.

The study by University of California economists Karthik Muralidharan and Paul Niehaus, and Dartmouth College economist Sandip Sukhtankar, is based on a large-scale experiment conducted by the author in collaboration with the state government involving the randomized rollout of a smartcard-enabled payment system for pensions and the rural jobs guarantee scheme across 158 sub-districts of the state and involving 19 million people.

The study debunks several myths associated with biometric programmes that have stalled the progress of the Aadhaar initiative at the national level. For one, it disabuses the notion that the poorest strata do not benefit from smartcard programmes. Those employed under the rural jobs guarantee scheme received payments through smartcards spent 21 minutes less on collecting each payment, and earned 23% more on average compared with those who did not receive smartcards. Since local officials found it difficult to siphon off funds or overstate work done, it led to a 12.2 percentage point reduction in leakage. Quite unsurprisingly, an overwhelming majority of those with smartcards said they preferred the new system to the earlier one, which involved a long leaky line of intermediaries and bribe seekers.

Second, the study establishes the cost efficiency of such smartcard programmes. The reduced delays in payments after introduction of smartcards and the savings in time for beneficiaries exceeded the government’s cost of programme implementation and operation ($4.44 million in time savings compared with $4.25 million cost of implementation). If one adds the reduction in leakages, the savings will be much larger. For instance, the leakage reduction of $38.7 million per annum in the jobs scheme alone is nine times the cost of implementation. Parliamentarians who described the Aadhaar initiative as a waste of public resources in a 2011 parliamentary panel report should now read the study by Muralidharan carefully.

The latest study is possibly the strongest piece of evidence in India that shows that biometric cards can enable the government to work smartly and deliver benefits to people with minimal leaks. To be sure, privacy concerns around the confidentiality of data secured by smartcard operators are legitimate. So are demands that Aadhaar should have statutory backing before being linked to government programmes, and that its implementation be improved to minimize bogus issuances. But these concerns should have been addressed by the Union government long ago.

While the opportunistic stance of the principal opposition, the Bharatiya Janata Party (BJP), contributed to the problem, the failure to create the required legislative framework for Aadhaar-based payments is largely because of the internal contradictions within the United Progressive Alliance (UPA) government. Because of these contradictions and the absence of leadership, the UPA has missed out on the biggest opportunity it had to transform India’s welfare system even while saving scarce public resources. The promise of reconfiguring the state delivery system through direct cash transfers by using Aadhaar-enabled electronic payments lies unfulfilled today.

Any radical change always meets with stiff opposition, and the Aadhaar project is no exception. But as the Andhra study shows, political commitment at the top can overcome local vested interests, which were opposed to the execution of the smartcard project, and attempted to influence staff selection.

A new government that takes charge at the centre in May will hopefully realize the potential of Aadhaar despite the teething problems it had to face, and harness it to help deliver services more effectively to citizens. Used well, this initiative can be among the biggest anti-poverty initiatives in the coming decade. It is after all the poor who need a unique identity number much more than the rich do.

Will direct benefits transfer improve poverty alleviation? Tell us at views@livemint.com

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Published: 01 Apr 2014, 06:36 PM IST
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