Infosys Chairman and former Unique Identification Authority of India (UIDAI) chairman Nandan Nilekani on Thursday said the benefit of direct transfer, which began with subsidies for LPG, pension, scholarships and other entitlements, would be used for state programmes.
Nilekani said there is a proposal for electricity, where instead of subsidizing the price of electricity, it is provided at market price and subsidized through cash transfer. “For state electricity boards it would mean unbundling the financial dimension from the business of electricity which they are in.’’
Nilekani was addressing #Future, a global digital conclave, organized by the state government.
He said, ‘there are a lot of implications for the economy as you take products out of the subsidised regime, keep them at market price and separately fund those who deserve to get a subsidy. This way you are actually making more and more parts of the economy competitive.”
He said India is creating a data infrastructure for its people in a way that empowers them, unlike in the West, where the data is in the hands of a few. India would be probably the first country in the world to have data empowerment architecture at the scale of one billion people.
“About 1.2 billion people use Aadhar. India has about 850 million bank accounts linked to Aadhar, of which about 550 million are unique bank accounts. This Aadhar-linked bank account is the fundamental basis for direct benefit transfer,” Nilekani said.
He said India runs the world’s largest direct benefit transfer system and so far the government has transferred Rs 100,000 crores into people’s bank accounts under the system.
Nilekani said the system has massive implications for the economy as it stops money going through multiple layers and its leakage. “Money now goes directly and electronically into people’s bank accounts. The largest programme using this is the LPG programme in which 140 million people gets benefits through gas cylinder subsidy. The cumulative saving of the government is in the order of about Rs 56,000 crores,” he said.
Regarding financial inclusion, he said the last four years had seen 300 million new bank accounts opened and its correlation to Aadhar, because it is easier for people to use an electronic KYC (Know Your Customer) and open an instant bank account.
“We are approaching an era where everybody has a digital ID number, a device to communicate with and a bank account. This is fundamental digital infrastructure. Mobile, bank account and Aadhar are three pillars of a digital world and everyone will have all these three things,’’ Nilekani said.
About the Unified Payments Interface (UPI), Nilekani noted that until October 2016, the month before the demonetisation, the platform was doing 100,000 transactions a month; and by February 2018 it had gone up to 172 million. “My estimate is that this will go to a billion transactions by December. We see a massive leap in payment is happening.”
“India is now doing 1.5 to 1.8 billion authentications a month. Authentication is very important because in a digital world, proving who you are is the essence of participation. Digital authentication allows you to create mobility, choice and convenience for people,” he said.
“Currently, India is doing 3 billion KYCs in a year. India is the only country where there is a common electronic KYC across five different regulators, all of which allow you to buy products instantaneously. This is why it’s very popular among banks and mobile companies. It’s a productivity benefit and cost benefit for service providers,” he said.
Talking about GST, he said the strength of the system was in taking a set of disparate technology systems and bringing the entire country onto one single network, with 10 million businesses now registered in it.
Billions of invoices are going to be uploaded in the system in the coming years, creating new power of data. Ten million businesses will have data of their business performance in a government audited system, and a company can now offer the data to a bank or any lender forming the basis of credit, he said.