Submitted by swagato on Tue, 08/23/2011 - 16:41
The UID has been generally discussed within the framework of governance and civil liberties. From the state’s point of view it is a project which will provide the residents of India with a unique identification number – an ‘identity’ issued and authorised by it (the state). It can be used wherever the identity of a person needs to be established and rights and entitlements authenticated. On the face of it, this is a rational solution to the problems of identification and authentication faced by people in their daily lives. From civil liberty activists’ stand point, it will restrict and violate individual freedom. But there is another dimension to UID: its location and role in the market economy, which became evident in the UIDAI and NASSCOM sponsored conference in Bangalore in late June this year.
The Bangalore conference was targeted at the technology industry and UIDAI and Nasscom meant business. The first day of the conference was dedicated to the software developers. All very technical. The sessions on second day were more general; there were sector-wise policy oriented presentations. The entire premise of the UIDAI’s pitch in the conference was that the UID project is an ecosystem comprising the government, people, vendors, developers, operators and applications or ‘apps’. Aadhaar would be the foundation for authentication of identity and private operators can build applications as layers on it. UIDAI assumes that in the near future authentication and identification would become crucial issues, if not central, in the economy and hence the UID ecosystem stands to become an attractive proposition for developers and operators. This ecosystem mimics the mobile telephone platforms like iPhone and Android – the “app market” model, where there are applications for almost every aspect of life. The entrepreneurial developers will see opportunity and innovate ‘apps’. Similar to the way paper money was replaced by plastic money or credit/debit cards for financial transactions, UID will solve the problem of authenticating a transacting party.
In the Bangalore conference, the UIDAI was trying to woo developers and make an argument for economic viability of the UID ecosystem. It was clear that UIDAI wants the platform to be of commercial nature over which economic transactions can take place. Two questions arise: When and why did ‘transaction’ become a problem? If it is a commercial infrastructure, then who stands to benefit most from the design of this system?
The market is about transactions or exchanges. In transactions, even before legal/contractual obligations set in, there is a question of trust between people. If the transaction takes place face to face, then it may be assumed that the trust deficit and information asymmetry among them are not serious enough. But where the transactions take place between unknown people or involve many people/multiple agents, then trust deficit and information asymmetry become significant issues. Authentication of one or both the parties and thereby verifying them and their rights and entitlements helps in creating this trust between two unknown individuals. Identification helps in establishing a person by providing his/her background.
The UIDAI claims that UID number will solve the problem of the kirana shops and small traders. It is argued that they tend to adversely select their customers and cannot avoid default by the latter. In case of lending, they cannot check the creditworthiness and credit history of the borrowers. Thus, the claim being made is that the Aadhaar number will solve these problems by providing information about a person. But this, in my opinion, is a misplaced understanding of how an informal economy works.
In the informal economy, transactions are generally of small amounts and usually take place either face-to-face or follow the social referral system, i.e. information is sought from within the social network in selecting a customer or a business partner. Transactions in an informal economy do not generally follow the principle of an open market; it is generally a closed network. Therefore, the UIDAI’s claim of helping small traders is seemingly incorrect. Intentionally or unintentionally the design of the Aadhaar platform is biased towards large volumes of anonymous transactions, which is a feature of the organised sector, where large capital rules.
To receive legitimacy the UIDAI promises to make the social welfare system ‘efficient’ and root out leakages, fake beneficiaries and ‘benefit-frauds’. However, the very idea of welfare is shifting. The ‘Third Way’ position floated by the Blair-Clinton regime had already argued that a government should not produce; rather it should procure from the market. Welfare benefits like education, health, etc. should not be ‘produced’ by the government, but should be ‘procured’ from the market. The latest twist is that the government should not involve in procuring directly. Rather it should offer cash or coupons to the beneficiaries, who will go to the ‘supplier’ of their ‘choice’, as a proper consumer does in a competitive market. On the other hand since business means money, policy-talk of “financial inclusion” and “cash transfer” indicated towards that money. This, as Mr Rajendra Pawar of NIIT claimed at the UID-NASSCOM conference, would start a “government-supported-entrepreneurship.” Central and state governments have always been large spenders and consumers. It is expected that more cash would be injected in the rural economy by the cash transfer schemes. This is purported to bring a large number of people into the financial market, either as recipients of cash from the government or as consumers of newer financial as well as material commodities. In this market, financial companies will face a large number of unknown individuals and the conventional model of paper trail would increase transaction costs. This is where the Aadhaar number becomes important: it establishes the identity of a person whom a financial company would deal with; a ‘business correspondent’ of the company can use a handheld device to complete the transaction and record the necessary information. Secondly, cash or coupons would be provided by the state to avail services like education and health, which were hitherto ‘supplied’ by the state, from the market. This market for education and health would require means to connect the ‘beneficiaries’ with the ‘service providers’ or ‘government-supported-entrepreneurs’, to identify the beneficiary and authenticate his/her/their entitlements. Again, the Aadhaar number becomes crucial in bridging the gap.
Thus, whether transactions in the economy are biased towards large companies or the social welfare sector, the Aadhaar number is very much part of the new economic structure and the market economy. This is perhaps why the UIDAI database has become more powerful than the National Population Register (NPR), both of which are in the business of recording biometric information of the residents. UIDAI has inverted the security imperative of NPR and converted it into an economic rationality, and thereby has received an enthusiastic support from economic players.
The Bangalore conference was targeted at the technology industry and UIDAI and Nasscom meant business. The first day of the conference was dedicated to the software developers. All very technical. The sessions on second day were more general; there were sector-wise policy oriented presentations. The entire premise of the UIDAI’s pitch in the conference was that the UID project is an ecosystem comprising the government, people, vendors, developers, operators and applications or ‘apps’. Aadhaar would be the foundation for authentication of identity and private operators can build applications as layers on it. UIDAI assumes that in the near future authentication and identification would become crucial issues, if not central, in the economy and hence the UID ecosystem stands to become an attractive proposition for developers and operators. This ecosystem mimics the mobile telephone platforms like iPhone and Android – the “app market” model, where there are applications for almost every aspect of life. The entrepreneurial developers will see opportunity and innovate ‘apps’. Similar to the way paper money was replaced by plastic money or credit/debit cards for financial transactions, UID will solve the problem of authenticating a transacting party.
In the Bangalore conference, the UIDAI was trying to woo developers and make an argument for economic viability of the UID ecosystem. It was clear that UIDAI wants the platform to be of commercial nature over which economic transactions can take place. Two questions arise: When and why did ‘transaction’ become a problem? If it is a commercial infrastructure, then who stands to benefit most from the design of this system?
The market is about transactions or exchanges. In transactions, even before legal/contractual obligations set in, there is a question of trust between people. If the transaction takes place face to face, then it may be assumed that the trust deficit and information asymmetry among them are not serious enough. But where the transactions take place between unknown people or involve many people/multiple agents, then trust deficit and information asymmetry become significant issues. Authentication of one or both the parties and thereby verifying them and their rights and entitlements helps in creating this trust between two unknown individuals. Identification helps in establishing a person by providing his/her background.
The UIDAI claims that UID number will solve the problem of the kirana shops and small traders. It is argued that they tend to adversely select their customers and cannot avoid default by the latter. In case of lending, they cannot check the creditworthiness and credit history of the borrowers. Thus, the claim being made is that the Aadhaar number will solve these problems by providing information about a person. But this, in my opinion, is a misplaced understanding of how an informal economy works.
In the informal economy, transactions are generally of small amounts and usually take place either face-to-face or follow the social referral system, i.e. information is sought from within the social network in selecting a customer or a business partner. Transactions in an informal economy do not generally follow the principle of an open market; it is generally a closed network. Therefore, the UIDAI’s claim of helping small traders is seemingly incorrect. Intentionally or unintentionally the design of the Aadhaar platform is biased towards large volumes of anonymous transactions, which is a feature of the organised sector, where large capital rules.
To receive legitimacy the UIDAI promises to make the social welfare system ‘efficient’ and root out leakages, fake beneficiaries and ‘benefit-frauds’. However, the very idea of welfare is shifting. The ‘Third Way’ position floated by the Blair-Clinton regime had already argued that a government should not produce; rather it should procure from the market. Welfare benefits like education, health, etc. should not be ‘produced’ by the government, but should be ‘procured’ from the market. The latest twist is that the government should not involve in procuring directly. Rather it should offer cash or coupons to the beneficiaries, who will go to the ‘supplier’ of their ‘choice’, as a proper consumer does in a competitive market. On the other hand since business means money, policy-talk of “financial inclusion” and “cash transfer” indicated towards that money. This, as Mr Rajendra Pawar of NIIT claimed at the UID-NASSCOM conference, would start a “government-supported-entrepreneurship.” Central and state governments have always been large spenders and consumers. It is expected that more cash would be injected in the rural economy by the cash transfer schemes. This is purported to bring a large number of people into the financial market, either as recipients of cash from the government or as consumers of newer financial as well as material commodities. In this market, financial companies will face a large number of unknown individuals and the conventional model of paper trail would increase transaction costs. This is where the Aadhaar number becomes important: it establishes the identity of a person whom a financial company would deal with; a ‘business correspondent’ of the company can use a handheld device to complete the transaction and record the necessary information. Secondly, cash or coupons would be provided by the state to avail services like education and health, which were hitherto ‘supplied’ by the state, from the market. This market for education and health would require means to connect the ‘beneficiaries’ with the ‘service providers’ or ‘government-supported-entrepreneurs’, to identify the beneficiary and authenticate his/her/their entitlements. Again, the Aadhaar number becomes crucial in bridging the gap.
Thus, whether transactions in the economy are biased towards large companies or the social welfare sector, the Aadhaar number is very much part of the new economic structure and the market economy. This is perhaps why the UIDAI database has become more powerful than the National Population Register (NPR), both of which are in the business of recording biometric information of the residents. UIDAI has inverted the security imperative of NPR and converted it into an economic rationality, and thereby has received an enthusiastic support from economic players.
