Do it the smart way

Inefficiency in public spending is one of the biggest and most persistent problems plaguing governance in the country. The solution lies in targeted spending, but it has proved difficult to accomplish so far. Arvind Virmani, who completes his tenure as Chief Economic Advisor to the Finance Minister in June, offers a way out: creation of a numeric ID and a web-based database that can be accessed by all and hence easily verifiable. The biggest irony of India’s economic growth has been that it has not reduced poverty much. The country continues to be home to the world’s largest population of the poor. This paradox is only heightened when you consider that many of our poverty-alleviation programmes have been running since the 1960s. And yet, two years ago, a story appeared of a village where people hadn’t received anything from the government even after 40 years of a programme being in operation. Poverty rates are still high in the country and this is because the tens of thousands of crores of rupees being pumped every year into social programmes have not been reaching the intended beneficiaries—the poor people.

Clearly, the problem is of targeting. Right now, there is no mechanism to monitor who is getting what, how much or anything at all from various programmes. Creation of a comprehensive database of the BPL (Below Poverty Line) programmes would make it possible to get all this information on computer at the click of a button. Later, this database can be expanded to include all large programmes like NREGS, and those in housing, education and healthcare.

The idea for a comprehensive information system came to me in 2005 during a study of 2-3 of the largest anti-poverty programmes, which showed that the total amount that had been spent on those programmes was enough to eliminate poverty. Handing money to the people directly seemed an ideal and the most efficient way of eliminating poverty. And one way of doing this was using a smart card system that delivers cash/subsidies to people as per their entitlements. In fact, I had proposed the introduction of smart cards in the Tenth Plan document as a replacement for the effete Public Distribution System (PDS) for plugging the enormous leakages and high administrative costs. But they never really took off because of lack of cooperation by the states for various reasons.

The idea of a smart card-based integrated information database got a major push from the last UPA government. A Planning Commission committee set up for the purpose, of which I was a part, proposed a numeric Unique Identification Data (UID) that can identify everyone through a number, and laid out the complete roadmap for its implementation. This included the numbering system to be adopted, its rollout in different parts of the country, and the kind of regulatory authority it would need. The UPA Cabinet approved the plan just before elections.

The process of selecting members for the UID Authority has gotten underway. The blueprint for the information system is with the Planning Commission and they should get going as soon as the new government comes. However, database creation is going to take some time, as the Registrar-General would like to do it with the Census, which is expected to take place in 2010 or 2011.

Advantages of UID

If every programme starts using the same numeric UID or smart cards, then the database also starts building up. For instance, if the Indira Awas Yojana uses the UID, then the database should show all the people who have been given houses under the programme, which can be put up on a webinformation system. Then, anyone can cross verify if those people are real and if they have got those houses. Eligible families who miss out on the allocations will similarly become identifiable. Since the UID will be a web-based information system, it will allow for its easy monitoring by all. But the biggest advantage of UID will be the empowerment of the poor, in whose hands it will work like a government-issued credit card. They can, for instance, enroll their children in a government school and pay for it through the smart card. The school can collect the money from the government. This will plug leakages and ensure to the poor easy access to government services and benefits from the poverty alleviation schemes. In addition, the UID can be used by financial service providers for fixing the identity of new customers.

UID’S USP It will be a database of every Indian with a numeric ID Rollout plan was approved by the UPA Cabinet It will make social programmes leak-proof and cost-effective The web-based database will enable easy monitoring by all The Delhi government has issued UIDs to majority of its vulnerable people Andhra Pradesh and Karnataka are already using smart cards for specific schemes

The UID also provides for a selfcorrecting mechanism: people should be able to post their responses on the web-based system and draw attention to any wrongdoing and thus influence the outcome of a particular programme. But these may take time and effort to achieve. A major advantage of UID is that it can enrich the database through continuous research, such as a database of people who don’t receive anything or those who seem to be getting too much or even fraudulent beneficiaries of government schemes. The possibilities are enormous.

Problems of implementation
Like all big changes, implementation of smart cards will not be easy and may require building a constituency for it first. Political will holds the key. Proposal for smart cards for PDS never got off the ground because none of the state governments agreed to undertake the experiment, even though funds had been allocated in the Tenth Plan for its introduction in sample areas. But more than people, it’s political will that will be needed to push it, especially in the second stage, when the need for digitization of all existing database would arise to create a comprehensive database.

Transfer via bank accounts
Direct transfer of cash to the poor people is also possible through banks. But there are some obvious bottlenecks with the banking system. For one, everyone would need to have a bank account. Second, since bank branches are not available everywhere, a lot of people would not be able to access them. Hopefully, that may be possible in future with the advancement in telephone banking technology.

For now, however, the smart card remains the best option as it empowers you wherever you are. All a person needs to do is to get his entitlement charged to his card once a year. It’s like a debit card. You have the power to use the money from the government account.

As told to Puja Mehra