Monday, September 13, 2010

Is India cozying up to Big Brother?

Critics assail India's universal ID number program.

By Jason Overdorf
September 14, 2010

NEW DELHI, India — In his office in the bureaucratic nerve center of New Delhi, Nandan Nilekani, the former corporate honcho and "blue-sky thinker" in charge of an ambitious plan to give every Indian a unique identification number, speaks as smoothly as ever.

But he appears a little harried. And when he's again questioned about his pet idea, his frustration begins to surface.

"The benefits will start rolling soon, so people will start to realize the value of it," he said in an interview with GlobalPost.

As the CEO of Infosys, Nilekani was the media's darling — a kid from a middle-class background who had risen to captain a billion-dollar company that was putting India on the global business map. He was a fixture at the World Economic Forum in Davos.

One of his stray comments was the inspiration for Thomas Friedman's "The World Is Flat," and his own book, "Imagining India," was feted as another mark of his genius here even before it won him a guest appearance on "The Daily Show with Jon Stewart."

Then he took on government work — albeit to implement one of his own ideas — as head of the Orwellian-sounding Unique Identification Authority of India. Though he still has plenty of supporters, he's now getting acquainted with the more critical side of India's press.

This month, as the Unique Identification project (UID) [2]— which aims to ultimately assign unique identification numbers to all Indians — completed its first pilot efforts and the actual, phased rollout loomed, a number of trenchant critics have begun to question whether the scheme is as clever as it's cracked up to be.

The more reputable skeptics, including members of the influential National Advisory Council, boast a wealth of grassroots experience with the corruption-plagued "public distribution system." They have attacked the program's potential efficacy in eliminating graft, questioned whether its benefits will justify its costs and even suggested the program's true aim is to identify and flush out illegal aliens.

And the fringe? Well, an obscure Christian sect from the state of Mizoram has stood up and refused to be counted, claiming that the ID project is, in fact, the Number of the Beast.

Issuing some 600 million unique identification numbers over the next four years, Nilekani's project will make India the first country to implement a biometric-based ID system on such a large scale. It will record every participant's name, address, date of birth, gender, parents' or spouse's names, and all 10 fingerprints and both iris scans — which means the government will potentially have every adult's fingerprints on file.

By charging a fee for authentication services, the program expects eventually to generate about $60 million in revenue a year, and it hopes to facilitate groundbreaking services like "micropayments" that would allow poor Indians whose typical transactions are only worth a few U.S. cents to get access to bank accounts, insurance, loans and so on. In other words, it's astounding. And it's a giant bulls-eye for skeptics.

"That's why we've built a large coalition," Nilekani said. "We've signed up with all the state governments. We've signed up with 10 banks. We've signed up with LIC (Life Insurance Corporation of India). We've signed up with three oil companies. We've signed up with many ministries. The idea is we create a grand coalition of partners to make this work."

Not everybody is on board yet. In a recent letter addressed to the rural development minister, Jean Dreze and Aruna Roy, members of the National Advisory Council and the Central Employment Guarantee Council, raised objections to the ministry's decision to link the the ID project to welfare program job cards without consulting them.

Dreze, a development economist who helped design the government's 2005 National Rural Employment Guarantee Act, also told a local newspaper that he had fears about the UID's real purpose.

"I am opposed to the UID project on grounds of civil liberties," Dreze told Business Standard. "Let us not be naive. This is not a social policy initiative — it is a national security project."

The claim echoed a statement made by former Intelligence Bureau chief A.K. Doval to Tehelka magazine.

“It was intended to wash out the aliens and unauthorized people," Doval told Tehelka. "But the focus appears to be shifting. Now, it is being projected as more development oriented, lest it ruffle any feathers."

Is the program really so scary? Apart from being linked to the holder's fingerprints and iris scans, it hardly differs from America's ubiquitous social security number — without which it is nearly impossible to get along in the United States. So, too, India already requires identification documents like ration cards, tax ID numbers and voter registration to access various services.

The identification number is also optional, though, like the social security card, it may become more and more necessary as agencies and corporations begin to require it. And while one hesitates at trusting the government too blithely, there are safeguards — except to confirm an ID, nobody can access the database other than national security agencies — and Nilekani's Unique Identification Authority is itself pushing for better privacy laws to protect data housed in computer servers.

"There are enough checks and balances in the system," Nilekani said. "Obviously, we take the concerns about security and privacy very seriously, and we believe that we have addressed those concerns."

Worries about the its usefulness are harder to dismiss.

At the heart of the matter is India's welfare apparatus, which has expanded under the Congress-led United Progressive Alliance government, thanks to New Deal-style legislation that guarantees 100 days of employment for rural workers, the right to education and the right to food. The expansion of the welfare state has re-opened age-old debates about cost, waste and theft.

Arguments run the gambit, but here's a small sample. Some advocate a "universal" grain subsidy to eliminate the fruitless hassle of sifting the destitute from the plain old poor. Others say the employment guarantee is robbing the farms of the heartland of migrant labor. Still others (including the Supreme Court) argue that the grain now rotting in government warehouses must be distributed immediately, and for free, never mind how.

Nilekani, whose ID number is smack dab in the middle, projects "immense benefits" from the UID. It will bring down transaction costs for the poor, because they will only have to establish their identity once. It will "transform the delivery of social welfare programs" by bringing in new recipients who'd been excluded because they had no form of identification. It will curb theft by helping the government to pay welfare wages directly to the worker, instead of distributing them through a middleman. And it will slash fraud by eliminating duplicate and false identities from the system.

"The country spends 100,000-200,000 crores ($20 billion -$40 billion) on all these programs," Nilekani said. "This will cost a fraction of that and deliver efficiency across the board. Why would you not do it?"

Critics like Reetika Khera of New Delhi's Centre for Development Economics say that, unique or otherwise, Nilekani's numbers don't add up. First off, fake names on the rolls are only one of a host of methods used to defraud the welfare system. Employers with the National Rural Employment Guarantee Act (welfare) also inflate working hours in collusion with employees for a share of their wages. Or owners of ration shops extort a share of the grain subsidy from their poor customers with the threat of withholding it altogether. Or the grain is stolen, with the complicity of the shop owner, before it reaches the shop, and he claims that the government has failed to deliver. The only estimates about how much theft stems from false identities are back-of-the-envelope type calculations, and even those say that the proportion is less than 10 percent of the total.

"The bulk of leakage (as much as half of the grain in some states) from the public distribution system occurs because there is a powerful, corrupt nexus between bureaucrats-politicians-ration shop dealers," said Khera. "The UID can do little to change this."

Moreover, Khera says, some of the benefits to which the program has laid claim are actually the general benefits of establishing bank accounts for welfare recipients and computerization — which are already taking place. According to the economist, the transition to bank payments is largely complete, with 83 percent of welfare job cardholders paid through bank accounts.

Meanwhile, the public distribution system system in the states of Tamil Nadu and Chhattisgarh, for example, has been computerized and made more transparent to good effect, thanks to political will. And the government's own management information system for the rural employment scheme has also delivered some benefits, though it still has shortcomings.

"Many of the measures suggested in the [Unique Identification Authority]'s documents relate to computerization, with little, if anything, to do with the UID," said Khera. "Yet, the benefits from computerization are claimed as benefits of the UID. These cheap marketing gimmicks cannot be applied so irresponsibly to welfare programs!"

That's exactly the kind of flak Nilekani never had to face when he was a simple CEO.

"We never said we'd solve all the problems. It's not a magic bullet," he said. "To reform anything, you need political will, social citizen oversight and you need transformational technology. ... This is one out of the set that you need, but if you don't have it, then you can't do it."

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