Aadhaar Card Issues

The concerns of using Aadhaar in welfare

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Aadhaar

Mains level: Aadhaar, rationale behind and Concerns with its Use in welfare

What’s the news?

  • On September 21, Moody’s Investor Service released a report advocating for decentralized digital identity systems over centralized biometric systems like India’s Aadhaar

Central idea

  • India has reacted strongly to the report released by Moody’s Investor Service, which advocates for decentralized digital identity systems over central biometric systems like Aadhaar. The government has refuted the claims made in the report and defended the Aadhaar system as the most trusted digital ID in the world.

What is Aadhaar?

  • Aadhaar is a 12-digit unique identification number issued to all Indian residents by the Unique Identification Authority of India (UIDAI).
  • It is based on biometric and demographic data, including fingerprints and iris scans, and serves as a standardized and secure means of identity verification.

The Rationale for Aadhaar

  • Unique Identification: Aadhaar assigns a unique ID to every Indian resident, ensuring distinct and verifiable identities.
  • Corruption Reduction: Aadhaar combats welfare fraud by verifying recipients, reducing ghost and fake beneficiaries.
  • Efficient Services: Simplifies access to government services, enhancing efficiency and accuracy.
  • Financial Inclusion: Links Aadhaar to bank accounts, promoting banking services in underserved areas.
  • Digital Transformation: Enables secure online authentication for e-services, e-commerce, and payments.
  • Data Security: Emphasizes data security and privacy measures, including encryption and authentication protocols.
  • Integration: Supports government database integration, enhancing governance and policy implementation.
  • Welfare Savings: Eliminates duplicates, leading to substantial savings and improved subsidy targeting.

Role in cash withdrawals

  • Aadhaar and Job Card Linking: First, a worker’s Aadhaar number must be linked to their job card, which is associated with the employment program, such as MGNREGA.
  • Aadhaar and Bank Account Linking: Second, the worker’s Aadhaar must be linked to their bank account. This linkage ensures that the Aadhaar number serves as the unique identifier for transactions related to this account.
  • Mapping with NPCI: The Aadhaar number must be correctly linked through the worker’s bank branch with the National Payments Corporation of India (NPCI). The NPCI acts as a clearing house for Aadhaar-based payments.
  • Cash Deposits: Once these linkages are established, any cash transferred by the government for benefits or payments gets deposited directly into the individual’s last Aadhaar-linked bank account.
  • Cash Withdrawals: Individuals can then withdraw money from their Aadhaar-linked bank account through private banking kiosks or by using private banking correspondents’ point of sale (PoS) machines. These transactions involve biometric authentication to confirm the individual’s identity.

Concerns with Aadhaar’s Use

  • Ineffectiveness Against Quantity Fraud: Aadhaar does not address quantity fraud, a prevalent form of corruption in ration distribution, where beneficiaries receive less than their entitled amount. The system focuses on identity verification but lacks mechanisms to prevent this type of fraud.
  • Authentication Challenges: In rural areas, authentication can be challenging due to unreliable internet, fading fingerprints, and limited phone connectivity for one-time passwords (OTPs). Multiple trips to ration shops may be necessary, leading to delays and uncertainty.
  • Lack of Transparency: The lack of public data on authentication attempts and failures raises transparency and accountability issues. The Comptroller and Auditor General of India (CAG) highlighted the absence of a system to analyze authentication errors.
  • Payment Failures: Any error in the Aadhaar-based payment process can result in payment failures. Issues like spelling discrepancies between job cards and Aadhaar databases can lead to authentication failures.
  • Coercion and Misdirection: Workers are often coerced into linking their Aadhaar with bank accounts without their consent, leading to wage diversion to unknown accounts. Misdirected payments, such as redirection to Airtel wallets, are challenging to detect and resolve.
  • Savings Claims: Claims of government savings through Aadhaar implementation have been questioned by researchers like Jean Drèze, Reetika Khera, Rahul Lahoti, and Anand Venkatnarayanan. They argue that the government’s assertions may be misleading and not supported by data.
  • Delays in Wage Payments: Despite government claims of reduced delays in wage payments under MGNREGA due to Aadhaar, recent research using extensive wage transaction data found no statistical evidence of these claims. Insufficient funds were suggested as a primary reason for payment delays

Security Concerns with Aadhaar

  • Lack of Accountability: Banking correspondents operating the Aadhaar-enabled Payment System (AePS) often lack a robust accountability framework, raising the risk of misuse or unauthorized access to individuals’ bank accounts.
  • Unauthorized Biometric Authentication: Some banking correspondents may ask individuals to undergo multiple biometric authentications, potentially granting them unauthorized access to individuals’ bank accounts.
  • Misuse of Aadhaar-Enabled Transactions: Reports and studies have highlighted cases where individuals’ money was withdrawn without consent through AePS, or they were enrolled in government insurance programs against their will.
  • Security Breaches: Instances like the ₹10 crore scholarship scam in Jharkhand in 2020 exemplify security breaches and fraudulent activities associated with Aadhaar-based systems.

Way forward

  • Data Security and Privacy: Strengthen data security measures to protect Aadhaar information. Ensure strict enforcement of data protection regulations and privacy standards.
  • Authentication Reliability: Improve the reliability of biometric authentication, especially in areas with limited connectivity. Develop backup authentication methods.
  • Process Streamlining: Simplify the process of linking Aadhaar with bank accounts and other services to reduce errors and misdirected payments. Provide clear information to individuals about the status and usage of their Aadhaar-linked accounts.
  • Addressing Corruption: Monitor and evaluate the impact of Aadhaar on reducing corruption in welfare programs. Implement additional measures to tackle specific forms of corruption, such as quantity fraud.
  • Independent Research and Evaluation: Support independent research to assess Aadhaar’s effectiveness and impact in various government programs. Use evidence-based findings to make informed policy decisions and improvements.
  • Accountability for Misuse: Establish mechanisms for holding individuals or organizations accountable for any misuse of Aadhaar data or fraudulent activities.

Conclusion

  • Moody’s report has sparked a debate about the effectiveness and security of Aadhaar. While it has brought some benefits in streamlining welfare programs, it falls short in addressing key issues and poses significant security risks. The government must address these concerns and work towards a more secure and efficient digital identity system, considering decentralized alternatives as suggested by Moody’s.

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