Where 1 Billion People Can Prove Who They Are

For its economy to develop, India had a rather basic task.

It had to be sure people could identify themselves.

The Unique Identification Program

Visiting Gagenahalli during 2010, you could have met Shivanna, a 55-year-old Indian farmer. In Gagenahalli, three-quarters of the population lived on less than $1 a day, the homes were made of dried mud, and most people were landless peasants.

However, all would soon change after a stranger walked through the village. Banging a drum to get everyone’s attention, he asked people to gather at the local schoolhouse to hear about the Unique Identification program (UID). By getting their fingerprints taken, their irises scanned, and some data recorded, they could receive a 12-digit Aadhaar number. And then, never having had birth certificates or driver’s licenses, or voters cards, for the first time, they could prove who they were.

The Benefits

By proving your identity, you can create a bank account. Even if no bank has an office nearby, you can use your cell phone with a local storekeeper. As the bank’s “local correspondent,” that person facilitates deposits and withdrawals. Then you can save small amounts and, because millions of people are just like you, the financial system gets massive injections of new cash. In addition, signing up for government assistance, you can prove you are receiving the subsidy instead of someone who might falsely claim to be you. And that 40-mile trip and the wasted hours for your government handout are no longer necessary because of electronic transfers.

Between 2009 and 2023, through a gargantuan initiative touching hundreds of millions of people, 93 percent of the population has an Aadhaar number.

Transforming lives, (shown below) one change related to their rice subsidy. This graphic was published during 2017:

Our Bottom Line: Economic Value of Identity

During 2019, McKinsey estimated that one billion people had no legal ID:

Next, they took us to how massive economic value would be created by more people proving their identity:

And, from there, they concluded that if people utilized their identity programs, they could “unlock economic value” that equals 3 to 13 percent of their GDP by 2030. In the following six countries, it happens through an improved economic flow that embraces more individuals:

Writing today’s post, I realized how many times I pull out my driver’s license to prove who I am. So, to our list of the requisites of the market system, let’s add proving our identity.

Sources and Resources:  This FT Tim Harford column was the most readable analysis of India’s program. Then, for more detail, I recommend this paper, this WSJ article, and this McKinsey Report.