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BW Businessworld

Inclusion Or Exclusion?

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The present government has been flailing its arms in honour of the poor with mixed success. It has run extremely expensive programmes in their name, leaving considerable doubt about how much they benefited the poor and how far they fed the mill of corruption. One of its endeavours has been to employ the poor as manual labourers in public works as close to where they live as possible. For this purpose, it launched a rural employment programme some years ago. It was easy for the rural bureaucrats and their superiors to create fictitious armies of poor workers and to pocket the wages they were supposed to get.

The existence of poor workers can be established by inspection of the projects on which they are supposed to labour; the government has provided for that. But while inspection can confirm the employment of workers, it cannot check whether they have been paid the wages they were supposed to get, for it is easy to falsify books of account. They could be asked if they were paid what they were supposed to get, but finding them from amongst hundreds, months after they were supposed to have worked, would be laborious; and if workers can be underpaid, they can also be trained to say that they were paid in full. Even if a bureaucrat or a contractor was found guilty of defalcation, administrative punishment, such as suspension in the case of the bureaucrat and disqualification for further contracts in the case of a contractor, is unlikely to discourage future defalcation; and the legal process of punishment is too slow and uncertain. Ex-post action does little to prevent corruption.

Hence the government has been intent on giving workers a permanent, verifiable identity, and on paying them through banks instead of in cash. People can be identified from their fingerprints; in this country with its numerous illiterates, it was the British practice from early days of their rule to take people's fingerprints. This continues till today. But human memory is inadequate to match fingerprints with names; and in any case, most bureaucrats do not have the training to distinguish between fingerprints. Hence fingerprint-based identification has been an unrealised ideal in India. Recently, some governments have begun to use machines that store and distinguish between fingerprints to make sure that foreigners who enter their country have left. Kenya, for example, fingerprints every foreigner entering the country by air; the fingerprints are attached to other data about him.

Some years ago, the government decided to make a registry of all Indian humans, and engaged Nandan Nilekani, one of the founders of Infosys, to create it. He still has not found a complicated enough Sanskrit name for it, so the agency he has created continues to be called Unique Identification Authority of India or UIDAI. But it has found a suggestive name for its intended product, Aadhaar, for its product, namely a unique 12-digit identification number for everyone. It has two controversial features. First, it is voluntary; in other words, people will have to go and ask for it. Second, an applicant will have no chance unless he is supported by some government authority. One can see why the government wants it this way. It wants to deny a UID to Bangladeshis and other undesirables; and it wants to use the UID to identify the poor.

Now, UIDAI is working with Indian Banks' Association to give every Aadhaari a simple credit card which would allow him to deposit and withdraw money. He will be able to use the card in one or both of two simple automatic teller machines which will be set up in every village. This scheme exposes the government's intent of creating the system exclusively for the poor.

This is extremely shortsighted. The ATMs, however primitive they may be, will be costly. By restricting them to the poor, the government will ensure that the costs are spread over very little business. If they are opened to the entire population, they will be more used, and make profits sooner. The government has tried for years to extend banking to villages. It failed because the banks found rural business unprofitable. The government is proposing to ensure that the mini-ATM initiative will also be unprofitable.

It is equally myopic to make the UID voluntary; the aim should be to give a UID to every resident of the country. For it can be extremely useful to the government, not to mention others. The UID can, for instance, replace the permanent account number for income tax; it can be enormously useful to the police. The government will find that its own task would become easier if it made the UID and its associated bank accounts universal, and did not try to confine them to its own chosen poor.

(This story was published in Businessworld Issue Dated 12-09-2011)

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