30th September 2010
Wednesday morning, Prime Minister Manmohan Singh and UPA Chairperson Sonia Gandhi handed out unique identity numbers to 10 tribals in Tembhli village, Maharashtra. The Unique Identification Authority of India (UIDAI) hopes to eventually give a unique 12-digit ID number to as many of India’s 1.2 billion people that want it: so far, signing up is voluntary. Understandably, much of the political rhetoric has been about how it will revolutionise life for India’s poorest who have few, if any, means to prove their identity, a most basic requirement for even accessing state-funded entitlements.
But the UID is about much more than enabling the poor to access government programmes and more even than cutting corruption and waste in government. The UID can be leveraged for use in a number of other applications, something UIDAI boss, Nandan Nilekani, is well aware of. The agenda for financial inclusion, for example. Along with a 12-digit number, people signing up for the programme can also opt to get a bank account number. Banks may not have the incentive to reach out to people with only limited financial resources on an individual basis: the transactions costs would be too high. But the UIDAI can cut costs by offering banks multiple potential customers with proven IDs and account numbers in a single window. The next step would be to combine the UID’s database with the outreach of mobile service providers to enable secure mobile banking that will act as substitute for the costly process of setting up more bank branches. Channelling the savings of the unbanked into the financial system can yield enormous gains for GDP.
But the UID is about much more than enabling the poor to access government programmes and more even than cutting corruption and waste in government. The UID can be leveraged for use in a number of other applications, something UIDAI boss, Nandan Nilekani, is well aware of. The agenda for financial inclusion, for example. Along with a 12-digit number, people signing up for the programme can also opt to get a bank account number. Banks may not have the incentive to reach out to people with only limited financial resources on an individual basis: the transactions costs would be too high. But the UIDAI can cut costs by offering banks multiple potential customers with proven IDs and account numbers in a single window. The next step would be to combine the UID’s database with the outreach of mobile service providers to enable secure mobile banking that will act as substitute for the costly process of setting up more bank branches. Channelling the savings of the unbanked into the financial system can yield enormous gains for GDP.
There’s much in it for the educated urban classes as well. Consider the time, effort and transactions costs involved in getting a passport, a driving licence or even a new bank account. Most of the documentation needed, and processing time, is simply about establishing whether who you say is really who you are. The UID number could eliminate these cumbersome processes and delays: no long wait for a police verification on a passport application, for example. Just one 12-digit number can make the life of every Indian more efficient.