Aadhaar enrollment camp, Nawada, Bihar (Courtesy of Unique Identification Authority of India | Government of India)
A quiet digital revolution with far-reaching consequences has been ongoing in India over the past two decades. Several layers of digital infrastructure have been stacked up to create the world's largest system of inclusion and equity.
This has lifted close to half a billion people out of poverty and laid the foundation for a more dynamic and prosperous nation. Besides the technologies themselves, smart policies and timely implementation have also played an important role.
The set of technologies that form this digital infrastructure is popularly dubbed "India Stack." This article takes a look at the base layer of India Stack, comprising India's national biometric ID system (Aadhaar) and mobile phone penetration. Combined with the government's financial inclusion program, this digital infrastructure is helping integrate the poorest sections of society into the mainstream.
A Mobile Revolution
In 1995, India liberalized its telecom sector, resulting in an influx of private players. The fierce competition among these players boosted innovation, improved service quality, expanded networks, and drove down prices.
This put mobile phones within reach of even the poorest people in remote areas, triggering a mobile revolution in the mid-2000s. Studies were published on how farmers and fishermen in rural India were using their mobile phones to access market, weather, and other information to improve productivity and income.
In September 2016, business tycoon Mukesh Ambani's new high-speed 4G network, Reliance Jio, went public. Reliance Jio offered a nationwide mobile data plan that came with a 4GB/day free data usage quota. To quote Ambani, "The world is at the beginning of a digital revolution. (…) India and Indians cannot afford to be left behind in this new world."
Overnight, mobile data prices came crashing down, catapulting hundreds of millions of poor Indians straight into the age of mobile Internet. Within six months of the launch of Reliance Jio, India had gone from being ranked 155th globally in mobile data consumption, to number one.
A National Biometric ID
Alongside the mobile revolution, India boasted another important event in 2009: the launch of Aadhaar, its national biometric ID program. Under Aadhaar, all Indian residents were eligible to receive a unique 12-digit ID by registering their biometric and demographic information with the Unique Identification Authority of India (UIDAI).
Before Aadhaar, passports, driver's licenses, and other documents were used to establish identity. However, there was no centralized system for the entire country. Aadhaar was designed to give the government a more comprehensive picture of the country's human resources. This was a prerequisite for a targeted delivery of government benefits, subsidies, and other services.
Serving as a unique national-level portable identity, Aadhaar also gives Indians greater mobility within the country. Where previously, people had to furnish proof of residence in addition to IDs to open bank accounts, get phone connections, or even apply for welfare benefits, now they can do all of these things simply using their Aadhaar number, no matter which part of the country they are in.
Aadhaar has also greatly simplified day-to-day activities such as conducting business, sending or receiving payments, and utilizing e-Governance and other services, thereby saving people a great deal of time and trouble.
While getting an Aadhaar number has never been mandatory, the benefits and overwhelming convenience have encouraged most Indians to get it. According to UIDAI, around 1.38 billion Aadhaar numbers had been issued as of September 2023.
Role Played by Japanese Technology
It must be mentioned here that Japan's NEC Corporation has made a valuable contribution toward the success of the Aadhaar program.
Setting up and running a nationwide biometric ID system for a country the size of India is not easy. For one thing, the registration process needs to be simple and efficient. Even more importantly, the technology has to be robust enough to prevent duplication, impersonation, or fraud.
NEC's biometrics system utilizes multiple types of biometrics (fingerprints, iris, and facial images) to efficiently ensure accurate identification. This has played a big role in helping create a robust national biometric ID system that Indians widely trust.
Financial Inclusion
In 2014, Prime Minister Narendra Modi announced a financial inclusion scheme called the Jan Dhan Yojana (literally "Public Wealth Scheme;" JDY for short). JDY also aims to expand access to financial services for all Indians.
In 2011, before the launch of JDY, the World Bank reported that only 35% of Indian adults had bank accounts. There were many reasons for this, but a big one was that a large number of Indians did not have any money to save, and account holders were required to keep a certain minimum balance in their accounts to maintain them. This discouraged many people from opening or maintaining bank accounts.
The JDY scheme did away with the minimum balance requirement and additionally offered free accident insurance and a RuPay debit card to account holders. More importantly, it made them eligible for direct bank transfer of government benefits, low-interest-rate loans, and a variety of insurance and pension schemes.
As a result, close to 18 million people across India opened JDY bank accounts in the very first week of the scheme's launch. As of August 2023, over 500 million JDY bank accounts had been opened, mainly in rural areas, with a majority of account holders being women.
Direct Transfer of Benefits
In 1985, then Prime Minister Rajiv Gandhi famously lamented that "Of every rupee spent by the government, only 17 paise reached the intended beneficiary." In other words, 83% of all the money the Indian government spent on welfare was going into the pockets of corrupt politicians and middlemen.
Using digital and financial infrastructure to cut out the middleman, the Indian government has finally been able to extend welfare benefits directly to the people who need them. JDY bank accounts are linked with both Aadhaar and mobile phone numbers of account holders. This enables the government to pay subsidies and benefits from various welfare schemes directly into the bank accounts of beneficiaries and then notify them through an SMS sent to their phones.
According to a 2023 study by the United Nations Development Program, "India saw a remarkable reduction in poverty, with 415 million people exiting poverty within a span of just 15 years (2005/6–19/21)." Lifting 415 million people out of poverty is no mean feat. For reference, the entire population of the USA is only 331 million.
Mobile penetration, Aadhaar, and JDY are just some examples of how smart policy decisions coupled with the efficient use of technology are transforming a country of 1.4 billion people for the better. The next article of this series will take a look at UPI, a revolutionary technology that has transformed the way Indians do business.
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Author: Usha Jayaraman
Usha has lived in Japan for over 20 years. A translator by profession, she is also a keen observer of developments in India and her country's relations with Japan. Usha is also a serious student of Indian classical music, history, and culture, and writes about them both in English and Japanese under the pseudonym Sādhana. Her published translations include literary works such as the Naoki Award-winning historical thriller The Red Star of Cadiz by Ōsaka Gō and technical works such as The Economics of Fintech.
