A national identity card will deliver subsidies and even strengthen national security.
India does not know who you are. Since we do not have a national identity system, Indians are largely anonymous. A national identity system is a most valuable public good because it generates positive externalities in four major areas: (1) welfare delivery and tax collections, (2) financial inclusion, (3) voter registration, and (4) national security. Many countries such as the USA, UK, France, China, and even Pakistan have implemented national identity systems. The NDA government began the implementation of a universal system through a national identification number (NIN) and a multi-purpose national identity card (MNIC), but in the last five years we have made little progress. Given the massive benefits associated with such a system, we must roll it out nationally within the next two to three years.
Various identity systems are in use in India currently, but they are neither universal nor multi-purpose. Such systems include the voter identity card, PAN card, and the passport, which are all photo identity cards. The ration card has no photo identity and is generally used for families, not individuals. Different identity cards are used for central welfare schemes such as the BPL card, the Rashtriya Swasthya Bima Yojana (RSBY health insurance for BPL families), and the Employee State Insurance Card; in addition, there are a variety of cards issued by state governments. Recently, many financial institutions have issued their own identity cards linking their customers to multiple accounts such as a savings account, credit card, and vehicle loans.
A universal national identity system must include several elements: (1) total enumeration (assigning unique identity) of the population; (2) personalisation which would enable identification through photo and biometric markers; (3) registration at birth and at 18 years; (4) data management including a national register; and (5) integration with multiple other systems including credit records, government benefits, and voter management. A national identity card could either be delivered through a magnetic stripe card (just like a regular credit card); or better still, through a smart card that contains enough memory and processing capabilities to run multiple applications. A magnetic stripe card costs Rs 10-15 and a smart card costs about Rs 100. Each card would have a photo of the individual, biometric information, and some key data such as name, date of birth, parent’s name, and birth city.
The first major benefit associated with a national identity system is efficient welfare delivery and tax collection. The NIN could be linked with a bank account so that each citizen would have a government-mandated bank account. All welfare payments and tax collections could be made through this account and the identity card could be used either as a debit card (or a stored value card) against this bank account. These individual accounts would greatly streamline welfare delivery across a wide range of schemes such as mother-child support, kisan credit, student assistance, and micro credit. In fact, FINO (a pioneering company supported by several banks) has already issued two million cards to deliver financial services to “unbanked” customers. All welfare payments would be made through the bank account on a regular basis. In fact, such types of cash transfer schemes are generally considered to be much more efficient and less susceptible to corruption, than various indirect schemes such as the Ration card or the National Rural Employment Guarantee Scheme.
An entire payment processing system could be built to support these cards, so that each Indian could avail of these services. Imagine every store with a payment terminal. Once a customer makes a purchase, the storekeeper would swipe the card through the store’s terminal and debit either the stored value on the card or the customer’s actual bank account. To prevent fraud, biometric identification (such as thumbprint) or passcodes could be used to authenticate the individual. The NIN would also become the basis for storing credit histories, tracking borrowing and savings behaviour.
A national identity system would also be a powerful mechanism for financial inclusion as laid out in the recent Rajan Committee Report on Financial Sector Reforms. Since each individual will have a bank account and a credit history, it will make it possible for them to save and borrow money. Farmers could get bank credit for making agricultural investments and expanding into related businesses like, for instance, animal husbandry. By tying this system to land titles, farmers would also be able to borrow against their property thereby converting a very illiquid asset into a much more productive resource. Micro credit groups could be set up electronically immediately reducing the administrative burden associated with detailed cash record-keeping.
Universal voter registration is the third major benefit of a national identity system. Today the Election Commission of India voter identity card is one of the largest databases existing in India, with over 500-million cards with photos issued till date. A national identity card would have information on residential status and therefore voter registration. Citizens would have to go to a registration centre if they changed their residence and update the voter rolls.
Finally, a NIN system would be a powerful tool for strengthening national security. All citizens can be identified through a NIN, and it would therefore be easier to track illegal immigration. No mobile phones or bank accounts would be issued without the national identity card. If any mobile phone or bank account was then used for anti-national activities, security authorities would be able to trace it quickly to its owner. Electronic activity linked to a NIN would also leave electronic traces across many systems, making it easier to unravel conspiracies and collusive activities. Obviously, authorities would have to ensure that the identity card could not be easily forged or hacked into.
There are many ways to implement a national identity system, ranging from a centralised authority to decentralised issuance by several agencies linked by common standards and consolidated data sharing. But it is entirely doable. One of the best national systems has been installed by the Government of Pakistan. They have a universal smart-card for storing photo and fingerprint information, supported by a very robust centralised database and a network of local offices. A similar system must be implemented through a National Mission as soon as possible. Once India knows who you are, help can reach you.
The author is Managing Director of Courage Capital Management, a global investment firm. Views are personal
