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Technologise banking, disbursement...
In his book Rebooting India, tech czar Nandan Nilekani provides technology-based solutions to some of the biggest problems afflicting the country. In this issue we carry some of his solutions.

BY 2020, 64 PER CENT of India’s population will be of employable age. To capitalise on it and ensure that all citizens have equal access to benefits, we need radical technological changes. 

Setting up a new business in India involves frustrating legal formalities. Technologising the process can help build an entrepreneur-friendly environment.  Citizens living in far corners of India have little access to banks. Instead of opening banks in rural areas, we can, with the help of technology, take banking facilities to these citizens’ homes. There are 90 million Internet users in India and smartphones make 40 per cent of e-commerce transactions. We must use technology to provide low-cost solutions to various problems. Such initiatives can help eliminate problems in healthcare and education, shrink wastage in government spending, simplify tax collection procedures, dispense with complex regulations and eradicate corruption.  Finally, the government must include every citizen in the mainstream, focusing on those living on the fringes of society with no access to benefits. Technology is a great leveler and can provide low-cost solutions to various problems.

Aadhaar - from zero to a billion in five years

Successfully rolling out Aadhaar proves that we have in us what it takes to bring social revolution through technology.

Aadhaar is the only universal identification offered to all citizens and is also the only one that uses biometric verification. It aims to provide smooth and seamless experience in transactions with the government. By offering benefits directly to the recipients, Aadhaar increases transparency and accountability. It is already widely used – by the MGNREGA for making payments, at Micro ATMs, for disbursal of LPG subsidies and for tracking attendance of bureaucrats. 

India has lakhs of ‘invisible’ citizens who don’t possess any identification. They, therefore, cannot be formally employed and end up being part of the un-organised labour sector where they are paid poorly for long hours of gruelling manual work. This sector accounts for 90 per cent of all employment in India. These citizens also don’t have access to government welfare schemes. The Aadhaar offers them a way out.  By not linking it to other ID, it is easy to get an Aadhar card.

Initially, the scheme was received with a lot of resistance. People were concerned about privacy.  To alleviate that, they were assured the information stored on an Aadhaar card couldn’t be misused. Another cause of worry was the cost of iris scanners that increased the project cost by Rs. 5 billion. But iris scanning is an indispensable element in the Aadhaar system. Finally, there was the concern that citizens without the card would lose out. So Aadhaar wasn’t linked to any government benefit scheme and it is not mandatory for citizens to have it. 

For sure, the Aadhaar is not a panacea to cure all that is wrong in India. But it is the first step towards building an inclusive India.


Aadhaar: behind the scenes

The government contacted Nilekani to head the UIDAI and he, in turn, got in touch with colleagues distinguished in the field of technology, to work with him on this huge project. At the first meeting of the UIDAI, the team, aided by market analysts and professors, arrived at what was an ambitious estimate of 600 million Aadhaar enrollments in five years. This number was comfortably exceeded.

With a modest year one budget of a billion rupees, the UIDAI team functioned like a start-up within a government set-up. It consisted of 300 members and worked with multiple outside vendors. People from various fields– IAS officers, RBI employees, IT employees on sabbatical leave, bureaucrats, lawyers, experts in marketing and PR – came together.  Initially, this caused a lot of conflict over their drastically different ways of working.

One of the distinctive features of the Aadhaar is that it collects only the bare minimum details required to validate that a person is who he claims to be. The combination of a biometric scan, iris scans and fingerprint scan is almost foolproof in verifying a person’s identity – it boasts 99 per cent accuracy. It is also the first government-issued id in India to recognize transgenders.

Six lakh villages have no banking facilities, 60 per cent of Indians don’t have bank accounts, 51 per cent of farmers have no access to credit, and only 3 per cent of Indians submit tax returns. This financial exclusion hinders every poor Indian’s ability to save, invest and consequently, improve his overall quality of life. Once basic facilities like credit, insurance and savings are made accessible to all citizens, their prices will automatically fall and they will be easier to obtain.

Most government schemes launched with the best of intentions don’t see fruition because of inefficiencies, and fixing this by revamping the system is tough. The only way out is to technologise the banking system. This will boost the per capita of every poor citizen by 15-20 per cent.

We also need to move towards a cashless economy. Cash comes with many costs and risks: the cost of printing money is high, as is the risk of losing it.

Micro-ATMs

One of the replacements for cash payments is micro-ATMs. To be set up in villages and operated by the local postmaster or corner shop owner, it will carry out transactions using Aadhaar-based biometric authentication. People can withdraw cash, collect payments from government schemes, send funds to each other, and even take loans from micro-ATMs. The cost of setting up a micro-ATM is considerably less than that of setting up an ATM or bank branch.

The Unified Payment Interface (UPI) is being developed as a centralised portal for all electronic payments that citizens can use to transact with the government and with others. As UPI runs on existing infrastructure, it is inexpensive and once implemented, will remove the chaos caused by multiple payment methods.

Soon, Aadhaar can be used to authenticate even online transactions and once phones come with inbuilt iris scanners, it can be used for phone banking as well. E-commerce, once considered a luxury, will become available to every Indian.

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