In March this year, headline managers of the government went to town to the sound of the proverbial drumbeats and with considerable backslapping, announcing that in 2021-22 a total of 7,422 crore (74.22 billion) digital transactions were carried out—a 33% increase over the previous year. The government-promoted Bharat Interface for Money-Unified Payments Interface (BHIM-UPI) emerged as the most preferred mode for digital transactions, accounting for 453.72 crore (4.54 billion) digital payments for a value of ₹8.72 lakh crore ($11 billion at current dollar rates). The volume of transaction put India ahead of China, its nearest competitor.
This was flogged by the government as a great success of mission Digital India, hurtling the heaving masses along the gilded digital highway towards a digital utopia, where data is more precious than dal, where byte is mandatory for a bite. Understandably, fintech entrepreneurs and data evangelists are ecstatic about the rapid evolution of the digital ecosystem. And there is some justification for their exuberance.
Data from the National Payments Council of India (NPCI) shows that besides 33% growth in digital payments, 2.4 billion FASTag transactions were carried out in financial year (FY) 2021-22. During the same period 2.3 billion transactions were carried out through the Aadhaar Enabled Payment System (AePS), amounting to ₹30,038 crore, while the volume of the instant inter-bank transfers, Immediate Payment System (IMPS),was 4.6 billion transfers for a value of ₹37.06 lakh crore. In December 2021, financial consulting firm Credit Lyonnais Securities Asia (CLSA) forecast that digital payments in India would breach the $1 trillion mark by 2026. Given the rate of growth of the digital payments ecosystem over the past few years, especially after the Covid-19 pandemic, the forecast might hold true.
The reasons cited by CLSA for this explosive growth include availability of cheap mobile data, growing penetration of smartphones, wide adoption of the government-backed, mobile-based UPI payment gateway and the Aadhaar-based payment system. But these numbers, impressive as they might appear, obscure a lot that surfaces when analysing granular data from several other sources which highlights the magnitude of digital exclusion.
The reasons cited by CLSA for growth include cheap mobile data, growing penetration of smartphones, wide adoption of UPI payment gateway
As recently as April this year, a performance audit report of the Unique Identification Authority of India’s (UIDAI) flagship Aadhaar project prepared by the Comptroller and Auditor General of India (CAG) pointed out a series of serious flaws, including the poor quality of biometrics that have been captured during the enrolment process, which created serious problems for a large number of beneficiaries of government assistance programmes that are disbursed through the Direct Benefit Transfer (DBT) mechanism, involving Jan Dhan bank accounts, Aadhaar and Mobile (JAM). Over the years, a number of field studies have provided empirical evidence of how overzealousness by various stakeholders, including the government, to push badly designed technology solutions to tackle some of India’s most endemic problems has created an insurmountable divide for some of the most vulnerable sections of the population in the heartland.
Data published in the 5th National Family Health Survey (NFHS) on internet use, which was released in May this year, pours cold water on this digital euphoria, offering a sobering reality check. According to the Organisation for Economic Co-operation and Development (OECD), digital exclusion, also termed digital divide, is defined as the “gap between individuals, households, businesses, and geographic areas at different socio-economic levels about both their opportunities to access information and communication technologies (ICTs) and to their use of the internet for a wide variety of activities. The digital divide reflects various differences among and within countries”. In keeping with this definition of digital exclusion, NFHS data points out that overall only 33% of women and 51% of men between the ages of 15 and 49 have ever used the internet. With the internet—broadband or mobile—being the foundational technology for building a digital economy, its non-usage by more than 66% of women and 49% of men paints a much paler picture of the claimed digital boom. The data also presents a grimmer picture in the rural areas, where the government’s welfare services are most needed. In rural India a mere 25% of women and 43% of men have ever used the internet. This data point clearly indicates that vast swaths of the population remain outside the digital realm. But low internet usage in semi-urban and rural areas, and especially among women, is not the only reason for digital exclusion.
To a great extent, the root of the problem is the way the government has made Aadhaar mandatory for availing of state-backed benefit programmes and services, despite the world’s largest biometric identity project being riddled with serious flaws even after more than a decade of its launch. Digital rights activists, researchers, developmental economists, and the media have repeatedly pointed out serious flaws with the technology and its implementation in the past decade, but successive governments have refused to address the issues in the most brutish manner and even threatened researchers and journalists with police action for highlighting the flaws, data leakages, and identity thefts.
In rural India just 25% of women and 43% of men ever used the internet. This indicates the vast swaths of the population outside the digital realm
One of the most damning observations made by the CAG is the inability of the UIDAI to identify the extent of mismatch in pairing personal information documents with the Aadhaar number. “All Aadhaar numbers were not paired with the documents relating to personal information of their holders and even after nearly ten years, the UIDAI could not identify the exact extent of mismatch. Though with the introduction of inline scanning (July 2016) the personal information documents were stored in CIDR, the existence of unpaired biometric data of earlier period indicated deficient data management,” says the report. Another serious flaw that has been pointed out by the CAG is the quality of biometrics that were captured during the enrolment process. “During 2018-19 more than 73% of the total 3.04 crore biometric updates were voluntary updates done by residents for faulty biometrics after payment of charges. Huge volume of voluntary updates indicated that the quality of data captured to issue initial Aadhaar was not good enough to establish the uniqueness of identity,” it says.
The report further highlights how the same set of biometrics has been used to issue multiple Aadhaar and points to the inefficiency of the de-duplication process built into the technology design. UIDAI also does not have a system “to analyse factors leading to authentication errors” nor did it “carry out verification of the infrastructure and technical support of Requesting Entities and Authentication Service Agencies before their appointment in the Authentication Ecosystem, despite stipulations in Aadhaar (Authentication) Regulations.” By the government’s own admission in Parliament in 2018, it removed 66 million ghost or duplicate beneficiaries linked to Aadhaar.
In short, the CAG rap sheet strongly validates what researchers have been pointing out for years: that Aadhaar is a badly-designed technology solution that has been made ‘mandatory’ in almost every walk of life despite the Supreme Court’s ruling in Justice KS Puttaswamy v Union of India that linking of unique identification number is ‘voluntary’ except for social welfare schemes. Therein lies the problem: linking welfare and social development schemes to a problem-riddled technology solution is guaranteed to create digital exclusion for two of the most vital services in rural India like buying foodgrains through the Public Distribution System and accessing MGNREGA wages or subsidies that are deposited in Jan Dhan accounts.
The most damning observation made by the CAG is the inability of the UIDAI to identify the extent of mismatch in pairing personal information with the Aadhaar number
Thousands of MGNREGA workers, in particular, face enormous hurdles in claiming wages—which are in any case plagued by delays well beyond the mandatory 15-day period—that are deposited in Jan Dhan accounts. A report, titled “Length of The Last Mile”, prepared by LibTech India in collaboration with the Azim Premji University and based on field research lays out the problems in considerable detail. “Unfortunately, the modalities of bank payments kept changing, creating periodic waves of new transition problems for many years,” writes noted developmental economist Jean Drèze in the foreword to the report. “In some states, cash-in-hand was successively replaced with post office payments followed by bank payments, payment through a specific bank, Direct Benefit Transfer (DBT) and Aadhaar Payment Bridge System (APBS) payments—I am skipping some intermediate steps. Each time the payment system was re-jigged, workers had to run from pillar to post to adjust to the new modalities (for instance, by opening a new account, or linking it with Aadhaar) and face another round of hurdles. Ten years after bank payments were introduced, the central government is still unequal to the task of ensuring reliable wage payments within 15 days.”
LibTech India’s report and the CAG appraisal are eerily similar regarding authentication failures. “It is startling, for instance, to learn that 40% of Customer Service Point (CSP) users in the sample have experienced biometric authentication problems (at least one failure in the last five transactions). Similarly, an astonishing 25% of the respondents reported instances of being informed (by sms or otherwise) of a wage credit of which they found no trace when they checked their account at the bank,” note the authors of the report. Up until July 2020, wage payments worth ₹4,800 crore were rejected due to technical errors of the payment system, bank account problems or data entry errors. A host of problems arise due to wrong seeding of Aadhaar numbers in the NPCI mapper that is mandatory for the Aadhaar Payments Bridge System (APBS) to function and is the sole responsibility of the bank of the Jan Dhan account holder. While cheerleaders of the apparent fintech revolution hail the great successes, the horror stories that write themselves due to digital exclusion invariably slip under the radar.
Cheerleaders of the apparent fintech revolution hail the great successes, the horror stories that write themselves due to digital exclusion
The calamitous reality of the digital divide was acutely exposed during the Covid-19 pandemic. It is forecast that by 2026 there will be more than a billion smartphone users in India, up from around 750 million in 2021. However, in August 2021, the minister for education, Dharmendra Pradhan, informed Parliament that at least 30 million children had fallen out of the education system—the data was incomplete—over the past year due to inaccessibility to a digital device. The disconnect between the hyped-up projections and real numbers got brutally exposed.
Even though the NFHS states that 93.3% of the population owns a mobile phone, it does not necessarily mean they have access to the internet—as borne out by low internet usage in semi-urban and rural India. During the pandemic lockdown, independent researchers found that children were losing even basic literacy skills. This problem was even more acute among Dalit and adivasi communities. In the absence of regular schools, children slipped back into child labour during this period. Low literacy rates, lack of awareness, and poor accessibility are leaving behind the marginalised at a much faster pace in this march towards a digital utopia.
At least 30 million children had fallen out of the education system over the past year due to inaccessibility to a digital device
Another dark underbelly of the rapid digitalisation is the manifold rise in cybercrime in India, which has seen more than a 300% spike in the past four years. Yet again, the poor, older persons and women are the most vulnerable groups, according to the data compiled by the National Crime Records Bureau. Now, the government’s rolling out of the Unique Health Identification Number (UHID), which is also linked to Aadhaar, has created another digital layer, linking it to yet another primary service in India. UHID is part of the National Digital Health Mission (NDHM).
According to the Unique Health Identifier Rules, 2021, the 14-digit number will help in the “identification and authentication of beneficiaries in various health IT applications”. It was rolled out rather surreptitiously during the Covid-19 vaccination drive. Those who got vaccinated suddenly found this 14-digit number on their vaccination certificates, especially after the second dose. The UHID was created without the explicit consent of the people. Though the rules say linking Aadhaar to UHID is voluntary, in reality, that is not the case. The government claims that the authentication process will help it to correctly identify the beneficiaries of public health schemes, activists and civil society organisations, on the other hand, have pointed out that the UHID will provide a carte blanche to any entity to collect enormous amounts of personal health data. Given that Aadhaar is already beset with problems, which the UIDAI itself is unable to track or solve, linking it to another identification number is bound to create yet another set of digital exclusions and defies wisdom.
There is no doubt that digitalisation is a fact of our modern and interconnected lives, but linking everything to numbered identifiers is akin to building a matrix of future disasters of which digital exclusion will be the most common outcome.