[Reader-list] MNIC- A number to identify us all.

[Taha Mehmood]

According to Managing Director of Courage Capital Management, Jayant Sinha,
a national identity card is a 'most valuable public good' hummm
interesting!!!

Please read on....

T



Jayant Sinha: A number to identify us all
Jayant Sinha / New Delhi December 06, 2008, 0:47 IST

A national identity card will deliver subsidies and even strengthen national
security.India does not know who you are. Since we do not have a national
identity system, Indians are largely anonymous. A national identity system
is a most valuable public good because it generates positive externalities
in four major areas: (1) welfare delivery and tax collections, (2) financial
inclusion, (3) voter registration, and (4) national security. Many countries
such as the USA, UK, France, China, and even Pakistan have implemented
national identity systems. The NDA government began the implementation of a
universal system through a national identification number (NIN) and a
multi-purpose national identity card (MNIC), but in the last five years we
have made little progress. Given the massive benefits associated with such a
system, we must roll it out nationally within the next two to three years.

Various identity systems are in use in India currently, but they are neither
universal nor multi-purpose. Such systems include the voter identity card,
PAN card, and the passport, which are all photo identity cards. The ration
card has no photo identity and is generally used for families, not
individuals. Different identity cards are used for central welfare schemes
such as the BPL card, the Rashtriya Swasthya Bima Yojana (RSBY health
insurance for BPL families), and the Employee State Insurance Card; in
addition, there are a variety of cards issued by state governments.
Recently, many financial institutions have issued their own identity cards
linking their customers to multiple accounts such as a savings account,
credit card, and vehicle loans.

A universal national identity system must include several elements: (1)
total enumeration (assigning unique identity) of the population; (2)
personalisation which would enable identification through photo and
biometric markers; (3) registration at birth and at 18 years; (4) data
management including a national register; and (5) integration with multiple
other systems including credit records, government benefits, and voter
management. A national identity card could either be delivered through a
magnetic stripe card (just like a regular credit card); or better still,
through a smart card that contains enough memory and processing capabilities
to run multiple applications. A magnetic stripe card costs Rs 10-15 and a
smart card costs about Rs 100. Each card would have a photo of the
individual, biometric information, and some key data such as name, date of
birth, parent's name, and birth city.

The first major benefit associated with a national identity system is
efficient welfare delivery and tax collection. The NIN could be linked with
a bank account so that each citizen would have a government-mandated bank
account. All welfare payments and tax collections could be made through this
account and the identity card could be used either as a debit card (or a
stored value card) against this bank account. These individual accounts
would greatly streamline welfare delivery across a wide range of schemes
such as mother-child support, kisan credit, student assistance, and micro
credit. In fact, FINO (a pioneering company supported by several banks) has
already issued two million cards to deliver financial services to "unbanked"
customers. All welfare payments would be made through the bank account on a
regular basis. In fact, such types of cash transfer schemes are generally
considered to be much more efficient and less susceptible to corruption,
than various indirect schemes such as the Ration card or the National Rural
Employment Guarantee Scheme.

An entire payment processing system could be built to support these cards,
so that each Indian could avail of these services. Imagine every store with
a payment terminal. Once a customer makes a purchase, the storekeeper would
swipe the card through the store's terminal and debit either the stored
value on the card or the customer's actual bank account. To prevent fraud,
biometric identification (such as thumbprint) or passcodes could be used to
authenticate the individual. The NIN would also become the basis for storing
credit histories, tracking borrowing and savings behaviour.

A national identity system would also be a powerful mechanism for financial
inclusion as laid out in the recent Rajan Committee Report on Financial
Sector Reforms. Since each individual will have a bank account and a credit
history, it will make it possible for them to save and borrow money. Farmers
could get bank credit for making agricultural investments and expanding into
related businesses like, for instance, animal husbandry. By tying this
system to land titles, farmers would also be able to borrow against their
property thereby converting a very illiquid asset into a much more
productive resource. Micro credit groups could be set up electronically
immediately reducing the administrative burden associated with detailed cash
record-keeping.

Universal voter registration is the third major benefit of a national
identity system. Today the Election Commission of India voter identity card
is one of the largest databases existing in India, with over 500-million
cards with photos issued till date. A national identity card would have
information on residential status and therefore voter registration. Citizens
would have to go to a registration centre if they changed their residence
and update the voter rolls.

Finally, a NIN system would be a powerful tool for strengthening national
security. All citizens can be identified through a NIN, and it would
therefore be easier to track illegal immigration. No mobile phones or bank
accounts would be issued without the national identity card. If any mobile
phone or bank account was then used for anti-national activities, security
authorities would be able to trace it quickly to its owner. Electronic
activity linked to a NIN would also leave electronic traces across many
systems, making it easier to unravel conspiracies and collusive activities.
Obviously, authorities would have to ensure that the identity card could not
be easily forged or hacked into.

There are many ways to implement a national identity system, ranging from a
centralised authority to decentralised issuance by several agencies linked
by common standards and consolidated data sharing. But it is entirely
doable. One of the best national systems has been installed by the
Government of Pakistan. They have a universal smart-card for storing photo
and fingerprint information, supported by a very robust centralised database
and a network of local offices. A similar system must be implemented through
a National Mission as soon as possible. Once India knows who you are, help
can reach you.

The author is Managing Director of Courage Capital Management, a global
investment firm. Views are personal