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About the Identity Pangs


In a recently published report titled “Decentralized Finance and Digital Assets,” global credit rating agency Moody’s Investors Service has raised some concerning issues regarding India’s ambitious digital identification program for its residents, known as Aadhaar.


Government Policies & Interventions
Issues Arising Out of Design & Implementation of Policies
Cyber Security

Mains Question:

Though Aadhar has revolutionsed the payment system of the government, it poses significant security and privacy concerns. Analyse in the context of recently released report by Moody’s. (10 marks, 150 words).

More on the report:

  • Despite its status as the world’s largest digital ID program, with biometric and demographic data on over a billion residents, Moody’s has highlighted security and privacy risks associated with “centralized” digital ID systems like Aadhaar, where a single entity controls identification credentials.
  • Moody’s has suggested the adoption of decentralized ID systems that grant users more control over their data.
  • Moody’s has also expressed doubts about the effectiveness of Aadhaar’s biometric-based authentication systems in verifying identities, noting that these systems often lead to service denials and raise questions about the reliability of biometric technologies, particularly for manual laborers in hot and humid climates.

Utility of Aadhar:

  • These concerns resonate with issues raised since Aadhaar’s launch and they have gained relevance as the government seeks to transition all payments under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to an Aadhaar-based payment system.
  • Despite initial hesitations, the current government has vigorously promoted Aadhaar, making the 12-digit number mandatory for various welfare benefits and activities, including opening bank or provident fund accounts, obtaining telephone connections, and remitting taxes.
  • Aadhaar’s widespread use, coupled with increased access to basic banking services and mobile phone connections, has facilitated the direct transfer of benefits to millions of individuals in welfare programs and has helped eliminate fraudulent beneficiaries and intermediaries.

How valid are the concerns raised by Moody?

  • There have also been instances of individuals being denied essential services due to the lack of an Aadhaar, while laborers and senior citizens have struggled to confirm their identities through fingerprints and retina scans.
  • An audit of the Unique Identification Authority of India (UIDAI) conducted by the Comptroller and Auditor General of India last year highlighted lapses that compromised privacy and data security, as well as flaws in the enrollment process resulting in duplicate and faulty biometrics.


India has promoted its digital public infrastructure, centered around Aadhaar, as a model for service delivery not only within the G-20 nations but also globally. Given these concerns and challenges, the government, which recently appointed a part-time chief to the UIDAI after four years, should consider conducting an honest review of the Aadhaar program and implementing necessary corrections before expanding its use further, whether for electoral rolls, private entities, or MGNREGA payments.

December 2023