Turn on Javascript in your browser settings to better experience this site.

Don't show this message again

This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more

A quiet revolution for a billion people

Aadhaar: a quiet revolution for a billion people

Aadhaar is a Hindi word which means ‘foundation’ or ‘base’. So it is fitting that Aadhaar is also the name of a biometric ID scheme which forms the basis of a quiet revolution in India.

India is employing the latest technology to overcome decades of under-investment which has led to incomplete official records, widespread illiteracy and millions of people who live their lives outside the official economy.

The inability to verify someone’s identity impedes the most basic tasks – opening a bank account; filing a tax return; claiming government assistance – that people in wealthier countries take for granted. Poor record keeping paves the way for abuses such as identity theft and fraud.

Over the past eight years the country has been building a national database which assigns a unique 12-digit identification number to each person, linked to biometric data such as fingerprints and iris scans. More than 1.1 billion people, out of a population of around 1.3 billion, have been signed up.

While initially voluntary, Aadhaar verification is routinely required to sign a mobile phone contract, buy a train ticket and even claim a free school lunch.

One commentator has lauded the scheme as the world’s first ‘national digital infrastructure’.

One commentator has lauded the scheme as the world’s first ‘national digital infrastructure’, an achievement on a par with the construction of Britain’s railways during its Industrial Revolution, or the interstate highways that contributed to America’s love affair with the car.

The hope is that it will eventually form the basis of the next generation of digital financial services – enabling digital payments across different platforms, opening a bank account with a selfie, and other things that haven’t even been dreamt up yet.

Technology start-ups, international banks and venture capital firms are said to be promoting research into new services that can piggyback off the database. If successful, India would become an unlikely champion of the new global digital economy.

It’s way too early to say whether the scheme will live up to the hype, but this is a good example of how a resource-constrained country can use a new and affordable technology – Aadhaar has cost around US$1 billion, an amount that would run Britain’s National Health Service for less than three days – to solve what seemed to be an insurmountable problem.

The authorities say they are already seeing the benefits. For example, there are reports of school enrolment numbers slashed as phantom students dreamt up to claim extra government subsidies disappear under renewed scrutiny.

However, its critics have denounced the database as a gross invasion of privacy, amid related concerns that personal data may have been mishandled and inadequate safeguards may have allowed some people to register under false names. Some scanners haven’t been able to read the fingerprints of manual labourers, their prints being too worn out.

No system is perfect, especially one created on such a scale. In an age when mass surveillance is becoming more prevalent, critics are naturally suspicious. But when governments elsewhere routinely collect personal data to issue ID cards, social security numbers and driver’s licences, is what India proposing really so intrusive or unreasonable?

Beyond India’s borders the country still suffers from an image problem. It’s true that grinding poverty, excessive bureaucracy, dodgy infrastructure and social immobility are deep-rooted issues that won’t go away anytime soon.

Aadhaar is a brilliant example of another side of this country – one that showcases the tremendous abilities of its brightest people and allows them to excel despite the obstacles.

But Aadhaar is a brilliant example of another side of this country – one that showcases the tremendous abilities of its brightest people and allows them to excel despite the obstacles.

Our equities colleagues have been investing in India since the early 1990s when they first spotted what can be achieved when a bit of entrepreneurial nous is backed by investment from the private sector and unshackled from red tape.

We’ve been excited by the progress that has been made on reforms which, along with sensible management of the economy, could lower structural inflation for good. It has already been fantastic news for the country’s bond markets.

This article originally appeared in the Telegraph on 4 June 2017.