How Modi’s demonetisation move boosted the number of Aadhaar accounts

Exclusion of the poor from social schemes still remains high in many states, say activists.


Prime Minister Narendra Modi’s demonetisation move had an unexpected beneficiary — a substantial increase in Aadhaar enrolment and its linking with bank accounts, a report released on Tuesday said.

Over 1.14 billion people or 95% of India’s population now have an Aadhaar number.

AADHAAR PENETRATION
  • 1.14 billion people have Aadhaar
  • 139 million people authenticated using Aadhaar
  • 40.7 million bank accounts opened using Aadhaar
  • Rs 22,006 crore disbursed through Aadhaar-based Direct Benefit Transfer (DBT)

The monthly average of bank accounts opened with Aadhaar before demonetisation last November was just 3.1 million, meaning that only 19.8 million bank accounts were seeded with Aadhaar since April 2016.

The Status of Aadhaar 2016-17 report showed that in December, 8.4 million bank accounts were linked with the 12-digit unique identification number, giving an unexpected fillip to the government’s bid to track money flow using it.

The momentum continued even after demonetisation, resulting in 47.1 million bank accounts or about half of all accounts in India being linked with Aadhaar by March 2017.

“As the government pushed for cashless economy, more people came forward to link their bank accounts with Aadhaar, especially those benefitting from government schemes,” said a senior UIDAI official, who was not willing to be named.

The notebandi period also saw an 8% increase in payment through Aadhaar-linked bridges and 6% jump in fresh enrollments for UID.

AADHAAR IN MAJOR SCHEMES
  • MGREGA: 79% of beneficariesAnnual budget: Rs 48,000 crore
  • Public Distribution System: 72% of beneficiaries Annual subsidy: 1,38,000 crore
  • Subsidised LPG: 82% of beneficiaries Subsidy: Rs 21,803 crore
  • National Social Assistance Programme: 51% of beneficiaries Annual budget; Rs 8616
  • Money disbursed through Aadhaar: 33%

Plugging Leakages

The Economic Survey for 2016-17 said 36% and 20% of Public Distribution System (PDS) and MGNREGS funds leak from the system and can be saved by application of Aadhaar.

The report quoted the government’s Direct Benefit Transfer portal to say that Rs 14,000 crore was saved in the provision of food subsidies by removing 23.3 million fake beneficiaries and the corresponding figure for cooking gas subsidies was Rs 26,000 crore with 35 million duplicates removed.

Under DBT, the government transfers financial entitlements to beneficiaries’ Aadhaar-linked bank account. The person can withdraw money only after undergoing an Aadhaar-based online authentication using finger print or eye scan.

However, activists claim that Aadhaar has become a cause for exclusion rather than inclusion.

Reetika Khera, a development economist at IIT-Delhi, said the most appealing claims of the UIDAI was inclusion of millions of Indians but the five years of the projects suggests that it has led to “unprecedented” exclusion.

“Another early fiction was that the purpose of Aadhaar is to help welfare schemes. The truth is closer to the reverse,” wrote Ranchi-based economist Jean Dreze in a recent article.

FAKES/DUPLICATES REMOVED
  • 23.3 million fake beneficiaries under PDS removed
  • 35 million duplicates for cooking gas subsidy identified
  • 8.7 million duplicates enrolled under MG-NREGA removed
  • Authentication failure rate in Andhra Pradesh and Telangana 17.4%: Finger Print14.4%: Iris scan
  • 85.9 % of total authentication failures because of biometric mismatch
  • 10.1 % due to internet connectivity issues

His team has found thousands of poor “wrongly excluded” from NGREA workers citing discrepancies in Aadhaar in Jharkhand.

The government’s response is that exclusion because of discrepancies is minimal.

“A portion of these savings may accrue from the exclusion of genuine beneficiaries,” the report said, while highlighting Aadhaar authentication failure (17%) in Andhra Pradesh and Telangana because of biometric mismatch.

A person gets monthly quota of ration only if their fingerprint or eye-scan matches that in the UIDAI database.

These reports, while indicative, do not provide a comprehensive view of Aadhaar’s current role in India’s social protection, the report said, while suggesting a comprehensive learning agenda and more open data to understand whether and how Aadhaar can be used to provide social protection in India.