Concerns for Aadhaar In India | 28 Sep 2023

Source: TH

Why In News?

Recently, In the midst of India's extensive digital infrastructure development, Moody's report “Decentralized Finance and Digital Assets” has underscored that the world's largest digital identification program frequently denies services to users.

• The report raises concerns about the dependability of biometric technology, while also sounding a warning about potential privacy and security risks.

What are the Key Highlights of Moody's Report?

• Privacy and Security Concerns:
  • The rating agency termed Aadhaar, and a new crypto-based digital identity token called Worldline, as two digital ID systems in the world that stand out due to their scale and extent of innovation.
  • However, they have “drawn scrutiny, especially concerning privacy and security”.
  • Aadhaar leads to the concentration of sensitive information with specific entities and increases the risks of data breaches.
• Biometric Authentication Concerns:
  • The Rating Agency remarked in its report about the government's adoption of Aadhaar for routing Direct Benefit Transfers to beneficiaries of welfare schemes such as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) etc, which is hindering their effective Implementation.
  • Aadhaar biometric faces hurdles, including the burden of establishing authorization and concerns about biometric reliability.
  • Aadhaar system enables access to public and private services, with verification via fingerprint or iris scans and alternatives like One-Time Passcodes (OTPs).
• Concerns Related to Service Denials:
  • The Unique Identification Authority of India (UIDAI) administers Aadhaar, aiming to integrate marginalized groups and expand welfare benefits access.
  • The system often results in service denials, and the reliability of biometric technologies, especially for manual labourers in hot, humid climates, is questionable.
• Issues Related to Centralisation of Data:
  • Moody’s made a pitch for decentralized ID (DID) systems such as digital wallets, based on blockchain capabilities that give users more control of their private data and can reduce online fraud.

What is the Government's Response to Moody's report?

• Recognition by International Agencies:
  • Government held that a number of international agencies, including the IMF and the World Bank, have lauded Aadhaar and several nations have also engaged with the Unique Identification Authority of India (UIDAI) to understand how they may deploy similar digital ID systems.
• Facilitation of Schemes like MGNREGA:
  • Government said that authors of the report are unaware that the seeding of Aadhaar in the MGNREGS database has been done without requiring the worker to authenticate using their biometrics.
• Advantages of Direct Benefit Transfer:
  • Government stressed that even payment to workers under the scheme is made by directly crediting money into their account and does not require the worker to authenticate using their biometrics.

What are the Decentralized Systems?

• In a centralized system, a single entity such as a bank, social media platform or government electoral roll controls and manages a user’s identifying credentials and their access to online resources.
  • Managing entity can dispose of the user’s identity data for internal or third-party profiling purposes.
• However, the adoption of DID — where personal data is saved in a user’s digital wallet and identity verification takes place not via a single, centralized institution but on a decentralized digital ledger such as a blockchain.
  • It increases privacy and reduces the amount of personal information held by intermediaries.
  • It can be stored and managed in a user’s portable and reusable digital wallet, rather than by a government, business, employer, or other entity.

What are the Challenges Related to Decentralised ID Systems?

• Digital IDs, centralized or not, can have negative social repercussions, since they may strengthen group identities and political divides, particularly if offered by technology and social media companies with significant monopolistic influence.
• Consolidation of control within these entities could lead to a concentration of power over individual identities, shaping perceptions and interactions in the digital realm.
• Further polarization of group identities and political affiliations would undermine the goal of a united and diverse digital space.