Aadhaar is best understood as a technology foundation upon which India can build a better, more-targeted and less-leaky subsidies system - food and fuel subsidies have been grossly misdirected over the past several decades. It can also help achieve radically higher rates of financial inclusion. In Bengaluru, efforts by a non-governmental organisation has seen construction labourers, among others, open bank accounts late at night at small grocery stores and remit money to their families in rural India. By being able to do so without paying onerous commissions of as much as Rs 100 for a remittance of Rs 1,000 has made them eager adopters of a financial inclusion effort that uses Aadhaar as a backbone. Aadhaar thus enjoys support at both ends of the policy spectrum: the poor without bank accounts, who are delighted to have access to services that are often elusive, and policymakers, who see larger goals such as reducing the fiscal deficit and wasteful expenditure. Not surprisingly, the judgment last week was welcomed by both the central bank governor and the finance minister. Chief Justice H L Dattu put forward an elemental question: if Aadhaar was to be used for the public distribution system and cooking gas supplies, "why not extend it to other activities?"
The thorny question of whether Aadhaar is a threat to privacy and indeed whether privacy is a fundamental right has again been referred to a larger bench to adjudicate. Many observers have criticised the government for muddling the issue of using Aadhaar by arguing that there was no fundamental right to privacy. Indeed, the government might not have had to embark on this long and tortuous road of protracted legal challenges to Aadhaar if it had legislated adequate laws to protect privacy. Aadhaar has been something of a case study in enrolment - some 920 million Indians have an Aadhaar identity - but its safeguards and benefits are poorly understood by many in the middle class. The use of it for a "know your customer", for instance, stays within the banking system. When an authentication is done, the system does not know the purpose for which it was done. No system this large is immune from, say, a hacker, but what it replaces was riddled with abuse. But that is no excuse for not putting in place a privacy law to prevent anybody from misusing individual data. The court's decision allowing a wider use of Aadhaar should ensure improved governance that is both more humane and pragmatic in dispensing welfare benefits. The government should now urgently get down to the task of framing an effective privacy law to address all doubts and concerns over data security.