Unique Identification for Indians A Divine Dream or a Miscalculated Heroism

In this detailed paper, Rajanish Dass questions if financial exclusion is just due to lack of residents’ identities or is it due to a larger systemic error and factors such as extreme poverty, illiteracy, lack of awareness and trust, corruption at various levels of the system or lack of willingness amongst banks?

01 July, 2011 Opinion, Finance
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Various countries across the globe have been contemplating giving unique identity to its citizens from time to time. Some countries have already implemented national identity schemes. In 2009, India decided to have Unique Identification (UID) number for its citizens. It created the Unique ID Authority of India (UIDAI) to generate the largest IT project of the globe—the UID project—to provide a unique 12-digit number to 1.2 billion residents of India.2 The project was named Aadhaar.

This paper, tries to put the current UID project of India into a perspective to evaluate the set of issues and concerns, as pointed by various stakeholders and try to understand the degree of criticality of those arguments.

There have been many drivers for providing unique identification to the citizens, such as, enhancement of security through detection of fraud, guard against terrorism and illegal immigration, to name a few. The UID issued to all Indian residents needs to be: (a) robust enough to eliminate duplicate and fake identities; and, (b) verifiable and authenticated in an easy, cost-effective way. The Prime Minister of India, as an exemplary step, has nominated Nandan Nilekani from Infosys to head the Unique ID Authority3, positing him with a rank of a Cabinet Minister.

The process of generating this identification number will start with getting the biometrics of each resident of the country along with certain demographic details, as would be needed for any business (like a bank or a telecom operator) or government organisation (like that of the Ministry of Rural Development) to identify a particular Indian resident. It has been decided to take the biometrics of all ten fingers, along with the iris scan of both the eyes and the photo of the face, as identifiers of all residents (uidai.gov.in).

There has been no clear evidence, either from the Government or from UIDAI, about the total cost of the project. Total expenditure in the financial year 2009-10 was Rs 260.21 million and there is no state wise allocation for the UID programme.1 The initial amount budgeted was Rs 1.2 billion

However, the challenges related to implementing a viable identity management system for a nation are worth considering—if citizens do not find value in such cards or the government departments and processes are not scaled up to match the working of such identification, the whole effort would be seriously questioned. Outrageous costs, technology gaps, privacy issues, political challenges, and lack of clear vision and mapping of the perceived benefits that can be accrued out of such an exercise are some factors that hinder viable and sustainable implementation of a national identity programme. For a nation the size and spread of India, the complexity of a unique identity scheme are multi-fold. For execution of such an exercise in India, the implementation planning will be critical. A guesstimate of the total cost of the project without considering the recurring cost is around Rs 15 lakh crore4 (US $33.33 billion) as reported by the Frontline magazine (Hindu, 2009). The cost of failure of such an initiative would be huge for a nation like India which has 27.50 per cent (2004-2005)5 of its population living below poverty line and around 45.9 per cent children, under three years of age, suffering from malnutrition every year.6

In order to understand the opportunities and risks of the project, the feasibility of the project has been evaluated from four different aspects: benefits as perceived and claimed by UIDAI, project cost, technological feasibility, and adoption (acceptance) of the service.

Claimed Benefits and Perceived Issues

The Aadhaar project has been projected as a weapon for ensuring effective and efficient delivery of various social welfare schemes to those who were deprived from accessing these benefits due to lack of identity. While it is the responsibility of UIDAI to offer an online technology platform that can provide a yes/no answer to authenticate the claimed identity of a person, the responsibility of ensuring effective and efficient delivery of the services has been left to the respective departments. Given the fact that the main cause of ineffective and inefficient delivery of social welfare schemes in India lies within the system and the respective departments, it would be interesting to see how realistic the claims of UIDAI prove, in delivering the goods on the ground.

Financial Inclusion

One of the major benefits that UIDAI claims to provide through Aadhaar is financial inclusion of the poor and the homeless by providing identity, which would help in opening bank accounts. The question however, is whether financial exclusion is just due to lack of the residents’ identities? Or is it due to a larger systemic error and factors such as extreme poverty, illiteracy, lack of awareness and trust, corruption at various levels of the system and lack of willingness among the banks? The provision of “no-frills” account to the poor and linking of these accounts with schemes like the MGNREGS, have not been able to achieve financial inclusion so far. Moreover, the objective of financial inclusion does not get achieved by ensuring that people open an account in a bank as seen from the example of Nandurbar district in Maharashtra, where many accounts with cards were opened, but have never been operated.

Even if we assume for a moment that UID would actually facilitate the mission of financial inclusion, is there any measure to estimate the impact of UID on financial inclusion? Is this the only alternative or the most cost-effective alternative that can help achieve the same amount of impact? These questions remain unanswered.

Public Distribution System (PDS)

There is the claim that Aadhaar would help in cleaning the PDS by eliminating the bogus and shadow ration cards in the system. It is believed that this approach would resolve the problems relating to PDS leakages, transparency and transportation as the leakages would become more difficult to hide. UIDAI expects the state governments to come up with a state-wide centralised Aadhaar-based MIS system that would allow the residents to collect ration from any shop of their choice. The centralised MIS is also expected to resolve the issue of exclusion of the poor due to denial of services both at the time of registration for the cards and purchase of goods. UIDAI claims that the issue of exclusion would be further addressed for the residents who do not get a PDS card due to non-availability of proper documents. As UID would be distributed by various agencies (registrar organizations), the citizens are assumed to fetch their UID from some other agency and furnish the same to PDS for getting hold of a PDS card.

Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)

Launched in 2006, MGNREGS is an attempt to transform the rural economy through legally guaranteed employment for up to 100 days per household. UIDAI proposes to integrate the Aadhaar scheme with MGNREGS. According to the proposal, UID would be integrated within the job cards, muster rolls, and bank accounts of the beneficiaries, and authenticated at various citizen touch points. This would ensure tracking of activities at the grassroots level and allow greater transparency within the system.7

But for this to happen, an inclusive banking system, supported by a countrywide broadband network, connected to teller machines at post offices and point-of-sales terminals even in villages across the country would be needed. Another huge hurdle is institutional. An overhaul of India’s vast and complex subsidy regime cannot just be a technocratic quick-fix; to succeed, it would need strong administrative and institutional legs and political will.8 It is also claimed that an estimated 3,50,000 new jobs will be created as a result of the UID project. The mega project is estimated to result in a commercial opportunity of $20 billion in the first five years, and from the sixth year onwards, $10 billion annually, making it one of the largest projects not only in terms of scale, but also in revenue potential.

There are however, concerns on the measures taken by UIDAI in order to ensure that a UID is not issued to any illegal immigrant. This is because UIDAI is using data collected by the Census authorities to prepare the National Population Register (NPR) for creating the UIDs. The NPR is not an exclusive database of Indian citizens. It contains data on all residents of the country, including foreigners. Critics also point out that UIDAI says we only produce a number. They are not taking responsibility to answer the ‘how’. What scrutiny has the UID gone through? How many phases does it have?…” Also, on the one hand, it is said that the UID is voluntary, but on the other hand, it was expected to be ubiquitous.

There is no indication of any cost benefit analysis being conducted by the Government for the UID project. The only thing mentioned in response to a question raised in the Lok Sabha about the same was that – “the benefits accruing out of the project should far outweigh the cost of the project”

Project Cost

There has been no clear evidence, either from the Government or from UIDAI, about the total cost of the project. Total expenditure in the financial year 2009-10 was Rs 260.21 million and there is no state wise allocation for the UID programme.9 The initial amount budgeted was Rs 1.2 billion, meaning that UIDAI could spend less than a fifth of the allocated budget, points to the fact that the project would have need to be better planned. The strategy document put forward by UIDAI, states only two components of enrollment cost. One that would be taken up by the enrolling agencies/registrars for carrying out the enrolment process; and two, the cost for the residents that they would need to incur for travelling to the enrolment centre including the amount of wage forgone by residents during the process. The document does not mention any figure for any such cost.

According to Nandan Nilekani, it costs the UIDAI Rs 100 to generate each Aadhar number, which would help address the challenges of inclusion.10 It is also reported that the government plans to pay the BPO for calls per minute. For each minute of inbound call, the Government will give a specific amount (say 2-3/minute). For an SMS push, the government will pay the BPO 3 per cent of the per-minute call rate.11

The total cost of ownership of the project needs to be calculated after considering various components like setting up of the required infrastructure by UIDAI and its partners, on-boarding of the enrolling agencies, maintenance of the infrastructure, training and awareness campaigns, cost incurred by the residents during the process of enrollment, and the regular updating of the information contained in the central database.

The more reputable skeptics, including members of the influential National Advisory Council, who boast a wealth of grassroots experience with the corruption-plagued PDS, have attacked the programme’s potential efficacy in eliminating graft, questioned whether its benefits will justify its costs and even suggested that the programme’s true aim is to identify and flush out illegal aliens.

There is no indication of any cost benefit analysis being conducted by the Government for the UID project. The only thing mentioned in response to a question raised in the Lok Sabha about the same was that – “the benefits accruing out of the project should far outweigh the cost of the project” (Ref: Lok Sabha Question no. 344, Date: 18th August 2010).

Technological Feasability

A central server would have to be maintained for storing the Aadhaar database. The application would have: i) a core category consisting of the enrolment and authentication applications services; and, ii) a supporting category consisting of the applications required for administration, analytics, reporting, and fraud detection interfaces with the logistics provider, contact centre, and the portal.12 According to Nilekani there are some technological challenges involved in the project, but India has the wherewithal to implement it successfully. Some of these challenges are in the areas of: a) the volume involved in creating and managing a database of 1.2 billion people spread over a huge area; b) speed of validation of each new entry against one billion entries in the database at a reasonable speed; c) security features that would ward off hackers; and, d) decision regarding the final set of biometrics used.


Given the fact that UID has been proposed to be voluntary for the residents of India to possess, the sustainability of the UID scheme is solely dependent on the extent of adoption among the residents and the service providers. According to UIDAI factors affecting the viability and sustainability of the project are not under the control of the authority. They are majorly dependent on the realised benefits by the service providers and the residents.

In order to ensure adoption of UID scheme among the service providers, it is necessary to identify the drivers and inhibitors of adoption for the key service providers. Issues of trust, validation and interoperability are likely to affect the adoption. Non-adoption of the infrastructure among some critical department(s)/organisation(s), may be because their own systems and processes are yet to be updated, or they may not feel the need to use the new infrastructure as their existing infrastructure is performing perfectly well for their requirements.

For residents to adopt UID, they would have to be made aware about the benefits, considering the fact they would incur some cost for enrolling to the UIDIA system. The National Food Security Act requires mandatory use of UID numbers—no UID, no food. Similarly, for MGNREGS each citizen needs to provide his UID before claiming employment. If the UID is compulsory, then everyone should have a right to free, convenient, and reliable enrolment. Concerns have been expressed about an unprecedented degree of state surveillance (and potential control) of citizens. If someone finds that her “identity information” is wrong, there is a legal obligation to alert the authority, but no right to correction. UIDAI is providing a platform for identification of the residents, and not an identity. The residents would need to prove their identity in some way during enrolment.


The UID project is a very critical initiative for India and we would need to be careful that the project does not face the same fate as similar other large scale exercises in the country or like the national ID initiatives of some other countries. Hence, it becomes critical to analyse the areas of concerns from whatever has been done so far in this initiative. The criticisms of the UID project can be categorised under four heads. First, the project would necessarily entail violation of privacy and civil liberties of people. Second, it remains unclear whether biometric technology – the cornerstone of the project – is capable of the gigantic task of de-duplication. Third, there has been no cost-benefit analysis or feasibility report for the project till now. Finally, the purported benefits of the project in the social sector, such as in the Public Distribution System (PDS), are largely illusive.

Substantial focus would be needed in the areas of trust generation among various stakeholder groups by understanding their readiness and the feasibility of such a critical initiative. Mapping drivers (and inhibitors) of adoption in considering socio-economic and cultural issues in the designated areas of rollout becomes an absolute necessity.

  1. Rajya Sabha Question no. 3285, Date: August 26, 2010
  2. http://www.business-standard.com/india/news/nandan-m-nilekani-appointed-as-chairpersonuidai/18/57/362090/.
  3. http://www.business-standard.com/india/news/nandan-m-nilekani-appointed-as-chairpersonuidai/18/57/362090/
  4. 1 Lakh = 0.1 million; 1 crore = 10 million; 1 million = 10 lakh; 1 billion = 100 crores
  5. http://www.indiastat.com/default.aspx)
  6. Ibid
  7. http://uidai.gov.in/UID_PDF/Working_Papers/UIDandNREGA.pdf.
  8. http://economictimes.indiatimes.com/opinion/editorial/direct-subsidy-transfer/articleshow/7506145.cms
  9. Rajya Sabha Question no. 3285, Date: August 26, 2010
  10. http://economictimes.indiatimes.com/infotech/software/Each-Unique-ID-number-costs-Rs-100-Nilekani/articleshow/7033805.cms
  11. http://economictimes.indiatimes.com/infotech/ites/Govt-may-roll-out-unique-ID-call-centre-on-July-12/articleshow/5938554.cms
  12. UIDAI website: http://uidai.gov.in/index.php?option=com_content&view=article&id=153&Itemid=13#ubcc

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