01 UID and Financial inclusion

An initial claim by UIDAI, still repeated by some, is that UIDAI will help the poor get bank loans, and therefore lead to ‘financial inclusion’. UIDAI will not lead to financial inclusion. Bank loans are given on the basis of creditworthiness. This is perhaps the most cunning lie. People are told that once they get the UID, they will get loans (we will get to the other services shortly).

The fact is that they will not. They will be worse off than before—they will be straddled with the huge project cost.

As the Training Manual on UIDAI and Aadhaar now tells us (page 4)

Benefits of having a Unique Identity
So what does a unique identity have to offer us?
• You get a bank account, passport, driving license, etc., which no one else has. Your money in the bank cannot be withdrawn by anyone except you!
• You can own a credit card and get a loan.
• You can own a house, a shop or a business.
• If you belong to the marginalized and deprived section of society, the government can help you by providing subsidized food rations and various beneficiary schemes.

The fact is that all of this is done now, and possible, without the UID. Yet, the converse can be asserted with confidence: processing an UID will not entitle you to any of these. The absence of UID does not prevent possession of credit cards, homes and businesses, unless the government makes it mandatory by administrative fiat.

The UIDAI has been trying some verbal gymnastics on this, tying themselves into knots and trying to scale back from their initial claims. Now they say that Aadhaar will help the poor open back accounts to access government schemes. This is what the manual says, just one page later. (page 4)

It is important to understand that merely proving one’s identity is not enough to guarantee a bank account, a house, or food rations. But for the government to be able to reach out to the marginalized and the deprived it is essential that each one has proof of identity (page 5).

Not surprisingly, the three examples given (pages 4 and 5) are geared more towards creating a fear psychosis rather than illustrative of why Aadhaar is needed in the first place. None of these need Aadhaar. What Aadhaar will do is to add another degree of harassment… hence the disclaimer immediately after the examples. It is anybody’s guess whether the disclaimer will be emphasised in the training of trainers.

As for the poor needing the UID to open bank accounts—supposedly for the government to reach them—Finance Minister Pranab Mukerjee disclosed that 84% of the money for NREGA is already being disbursed through bank accounts and post office savings accounts . So are we doing the whole exercise for just 16% of 37% the population below poverty—meaning under 6% of the Indian population at best.

Here we do not for a moment suggest that the government cannot make anything mandatory for accessing any of its services. But that is administrative fiat rather than technical necessity—nor is it a security requirement.