National ID cards and Poverty elevation.

Poverty reduction is one of the main issues the Indian Government is dealing with. Unfortunately, current anti-poverty schemes are treated with great skepticism due to the large sums of money that never reach their intended recipients. Currently, the Indian Government spends 10% of its budget on subsidies but economists estimate more than half this money fails to reach its intended targets. Fraud is one of the main reasons for this loss of subsidy money and the National Identity Card could address this issue by enabling more reliable identity checks by utilizing the holder’s biometric data stored on the card.

Poverty reduction programs in the form of food and fuel subsidies for individuals below the poverty line also fail due to the incompatibility of Below Poverty Level cards in different states across the nation, since BPL cards only apply to the specific state in which they were issued. Thus, migrant workers who travel to other states in search of work cannot use their old BPL cards. Unlike India’s numerous existing forms of identification, the National ID Card will be recognized around the country ensuring subsidy money reaches the individuals who require it the most.

Currently, the leakage of money intended for the poor is estimated to be around 60% and projections for the national ID card estimate this figure will drop to 10% after large-scale implementation due to the reduction in fraud and enhanced ability to better target subsidies towards individuals who require them by identifying and providing better services to people below the poverty line. This represents enormous savings for the government and the increased effectiveness of poverty reduction programs, as a result of which, unlike most poverty reduction proposals, the national ID card scheme has received near unanimous approval. The national ID card project is also set to become the foundation of the Citizens Smart Card Project, which will enable citizens to avail subsidies on food, energy and education depending on their entitlements, according to the 11th report of the Second Administrative Reforms Commission.

The National ID card could also have wider ranging impacts on poverty elevation in India as it could enable the “financial inclusion” of the two thirds of Indians who do not have bank accounts, providing them with the necessary identification to create a bank account.