Various government initiatives, from direct benefit transfers (DBT) to the DigiLocker and a lot more, remain in a limbo due to the lack of legislative backing for the unique ID or Aadhaar programme—that’s a sad state of affairs for one of the government’s most successful projects that, by the end of the month, will have got over a billion enrolments. It is true, the Supreme Court has given the government permission to use the programme for distributing different type of subsidies—R44,035 crore was disbursed in FY15, mostly through either Aadhaar or the Aadhaar payments-bridge—but the programme has never been on a rock-solid footing and has been challenged on many grounds, including privacy. This is now set to change with the government all set to bring a Bill in Parliament later today, and since it will be a money Bill, there is no question of it not getting passed. While the founders of Aadhaar have always maintained the system architecture ensures it cannot be abused—it can only answer ‘yes’ or ‘no’ for whether a biometric matches an Aadhaar number—it is important that a proper privacy framework be laid down and adhered to, especially given India’s weak privacy laws.
Once Aadhaar has legal backing, as the finance minister has said, a lot more subsidies can be targeted better, subject of course to the state governments identifying the beneficiaries and ensuring their bank accounts are Aadhaar-seeded—potential savings run into well over R1 lakh crore each year at just the central government level. More than that, government departments can start sending digitally signed records of education/caste/property, etc, to the DigiLocker of each citizen. Aadhaar-enabled financial transactions of the type being developed by the National Payments Corporation can reduce costs to a fraction and completely transform the payments system, mutual funds will be able to do eKYC to cut costs to a fraction—and hence dramatically increase their target market—and, as the India-stack of patents indicates, there are many more innovations that can ride on Aadhaar. In terms of what it can do to India’s productivity, this is perhaps the most significant pieces of legislation in a long time.