Tuesday, February 01, 2011

Establishing an identity system for one billion people

India's government is in the process of creating a national ID system, similar to Social Security in the states. The task is gargantuan as India has over a billion people to photograph, fingertip scan and name. India hopes that not only will the IDs provide a proof of identity, but will also cut down on corruption and graft. The national ID system it will be easier to identify who are supposed to receive government help programs like subsidized food.

From the Economist, we find out more about India's goals with the system.

The government’s aim is to improve services and reduce corruption. A shocking two-thirds of the subsidised grain that the government allocates to the poor is either stolen or adulterated. When middlemen say they have delivered so many bags of rice to so many thousands of peasants, there is no way to tell if they are lying. But if each peasant has to scan her irises every time she picks up her ration, it will be harder to scam the system. Similar controls could be used to curb voter fraud.

A reliable way of identifying people would also smooth financial transactions. Some 42m poor households toil for a government scheme that guarantees them up to 100 days of work at the minimum wage each year. The money is welcome; the trek to the bank to collect it is not. Ram, a peasant in Madhya Pradesh, walks 6km (4 miles) to the bus stop, travels 14km clinging to the roof of a bus, waits two hours in the bank and then does it all again in reverse. The trip swallows a fifth of his earnings, in the form of fares and the opportunity cost of missing a day’s work.

The identity scheme could help Ram avoid this hassle. The plan is to supply scanners to village shops and link them to distant banks via mobile phones. The man could walk in, scan his fingers and authorise the bank to transfer his money to the shopkeeper’s bank account. The shopkeeper could then advance Ram the money, minus a small fee.

Small shopkeepers are salivating. B.C. Manjunath, who runs a tiny kirana store selling boiled sweets, soap and single eggs, sees two ways to profit. As well as charging fees, he would benefit from customers with more cash in their pockets. At present he has little choice but to extend credit. Customers owe Mr Manjunath’s family 20,000 rupees ($440), interest free.

Because the UID system is an open platform, businesses will be able to graft inventive applications onto it. Hospitals could match medical records with patients who are far from home. This would help make records portable, says Shivinder Singh, the managing director of Fortis Healthcare, a chain of private hospitals. Insurance would become easier to provide. Barely one in 100 Indians has health insurance, not least because identities are so hard to verify. Indeed, all kinds of insurance would be much cheaper if companies had a reliable way of discovering, for example, that a man applying for car insurance in Mumbai had been convicted of drink-driving in Delhi.

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