India’s Aadhaar system

Syllabus: GS2/ Governance

Context

• Nobel laureate Paul Romer, who won the 2018 Economics Prize, recently praised India’s Aadhaar system, calling it one of the most significant technological innovations globally. 

What is Aadhaar?

• Aadhaar number is a 12-digit random number issued by the Unique Identification Authority of India (UIDAI) to the residents of India after satisfying the verification process laid down by the Authority.
• Person willing to enrol has to provide minimal demographic and biometric information.
  • Biometric information: Ten Fingerprints, Two Iris Scans, and Facial Photographs.

India’s Aadhaar Programme

• Aadhaar is a strategic policy tool for social and financial inclusion, public sector delivery reforms, managing fiscal budgets, increasing convenience and promoting hassle-free people-centric governance. 
• It is one of the key pillars of the ‘Digital India’, wherein every resident of the country is provided with a unique identity. 
• It has features of Uniqueness, Authentication, Financial Address and e-KYC, enabling the Government to directly reach residents  in delivery of various subsidies.

Aadhaar-based payment system (ABPS)?

• Under ABPS, workers’ Aadhaar numbers are linked with their job cards as well as their bank accounts. 
• It uses the worker’s Aadhaar number as their financial address. 
  • To become eligible for ABPS, workers have to get their Aadhaar card linked to their job card and the name on the Aadhaar card must match the name on the job card.
• The ABPS became mandatory from January 1, 2024.

Benefits of Payments through ABPS

• Easy and Secure Authentication: Aadhaar provides a unique identification method through biometric authentication, making transactions secure and reducing the risk of fraud. 
• Convenient: Aadhaar-based payment systems eliminate the need for physical cards or documents for financial transactions. 
• Reduced Leakages in Subsidy Programs: Aadhaar is often linked to various government subsidy and welfare programs, ensuring that the benefits reach the intended beneficiaries directly. 
• Promotion of Digital Payments: Integration of Aadhaar into payment systems contributes to the government’s push for a less-cash economy by promoting digital transactions.
  • This aligns with broader initiatives to enhance the digital infrastructure of the country.
• Reducing Frauds: By linking Aadhaar to welfare programs and services through the JAM Trinity (Jan Dhan-Aadhaar-Mobile) and Direct Benefit Transfers (DBT), millions of underprivileged individuals now receive subsidies and benefits directly, eliminating middlemen and reducing fraud. 

Concerns with ABPS Payments

• Over- Reliance: Over-reliance on technical tools has resulted in problematic implementation, with beneficiaries devoid of a proper recourse for corrections in the system.
• Authentication Issues: There have been instances where individuals faced difficulties with biometric authentication due to factors such as poor connectivity, technical glitches, or errors in the Aadhaar database.
  • Errors in any step of the process result in payment failures.
• The bank account must be Aadhaar-seeded and mapped with the National Payments Corporation of India (NPCI), conditions that are difficult to meet for workers in rural setup and poor infrastructural assistance for meeting the official requirements. 

Conclusion

• The Ministry of Rural Development has said that it may consider an exemption from ABPS on a case-to-case basis for gram panchayats if there are technical issues.
• Aadhaar-enabled Direct Benefit Transfer (DBT) has significantly transformed India’s welfare landscape by enhancing transparency and ensuring the efficient delivery of services. 

Source: DTE