Aadhaar Bill and government benefits: Risk of increasing exclusion?

  • Blog Post Date 04 May, 2016
  • Perspectives
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Jean Drèze

Ranchi University; Delhi School of Economics

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Reetika Khera

Indian Institute of Technology Delhi

Supporters of Aadhaar express the hope that will reduce inclusion errors and corruption by eliminating ghost beneficiaries, say in schemes like MNREGA. Are there substantial benefits to be reaped on this account?

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Raju Rajagopal

There is no question that the use of Aadhaar to de-duplicate databases can be very effective in eliminating ghost and duplicate beneficiaries. The example of LPG, where the government claims to have saved over Rs. 150 billion in the “initial stages alone”, only reinforces the anecdotal evidence that Aadhaar and the Direct Benefit Transfer (DBT) Scheme linked to it, are beginning to have a significant positive impact on the ground.

It is unfortunate that some critics are set on trivialising the issue of “wrongful inclusions” in public subsidy programmes and question the demonstrable savings in LPG subsidies by arguing that some of those savings could have been achieved even without Aadhaar. They ignore the fact that numerous attempts by states to de-duplicate beneficiary databases using electricity meter numbers, ration card numbers, etc. have previously failed; and such efforts were one-time or episodic at best, while Aadhaar-based de-duplication is a continuous and sustainable process over time.

Yes, there are theoretically other alternative tools to Aadhaar to help weed out ghosts and duplicate beneficiaries, but such tools have often themselves been suspect and have led to questionable results. That is the true import of a credible lifetime ID such as Aadhaar, whose efficacy as a “Unique ID” has not been seriously challenged so far, which can be used not only for de-duplication but also for real-time authentication of beneficiaries.

In my view, technology has often been more effective as a change agent in India than all the moralising and threats of punitive actions (example, railway reservations, tax returns, etc.). And Aadhaar has the true potential to become the backbone of such a technology-lead anti-corruption effort at the point of service delivery.

Jean Drèze

Most of these hopes are based on a misunderstanding of how corruption works. Linking the bank account of a MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) worker to his or her Aadhaar serves no purpose – there is little identity fraud in the banking system, at least in the context of social programmes. Aadhaar-based biometric authentication at the worksite might serve a purpose, in principle, but it is an inappropriate technology for rural India. In the PDS, the reliability of beneficiary lists has greatly improved, and the main problem now is not identity fraud but quantity fraud – dealers give cardholders less than what they are entitled to. Aadhaar is powerless against quantity fraud. In social security pension schemes, again, there is very little identity fraud. Since biometric authentication is highly unreliable with the elderly, imposing it would be unwise and unfair: it would save small amounts of government money at the cost of severe hardship for the poorest of the poor.

None of this is to deny that intelligent use of Aadhaar might help to reduce specific types of corruption. But the grand promises of massive savings have no basis. The small gains that can be made have to be weighed against the costs of Aadhaar, not only in terms of an infringement of civil liberties but also in terms of a possible disruption of fragile welfare programmes. Further, all this has to be evaluated in the light of the way the Indian government works, including its fascination with sophisticated technology and lack of attention to the hardships it may create for poor people.

Bharat Ramaswami

Yes, that is likely. For subsidy schemes, the major gain may well come from reducing diversions to the black market.

Reetika Khera

Starting in 2010, I have written to show how, a priori, there is no role for Aadhaar in combating corruption in MNREGA or the PDS (Public Distribution System). For example, in MNREGA wages are now deposited in bank or post office accounts. Now, corruption can occur in the following ways:

  1. Coercion (when labourers’ wages are forcibly ‘shared’ with corrupt officials after being withdrawn from the bank or post office),
  2. Collusion with labourers where days of work are inflated to defraud the system. In such cases, UID authentication cannot help.
  3. Collusion also occurs between MNREGA functionaries and post office officials (“identity fraud”), who operate the labourer’s account without his or her knowledge. It is only in this case that the UID-authentication can help. (Even here, identity fraud can be controlled further by switching to banks).

Thus, the belief that Aadhaar could “be a tool to loosen the stranglehold of the local elite by reducing the dependence of the local population on them” is misplaced. After biometric authentication at the bank or ration shop, the local elite can continue to cheat by withholding some cash or grain.

Corruption in the PDS and MNREGA has been on the decline without Aadhaar – of course, more needs to be done. The most remarkable example perhaps is that of PDS in Bihar where four independent studies (including one in which I was involved) show an improvement – these include studies by Somanathan and Kelsrud (2013 and 2015), Kumar (unpublished), Bhattacharya (unpublished).


  1. To view all responses by participant, please click here: Raju Rajagopal, Jean Drèze, Bharat Ramaswami, Reetika Khera
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