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Over the past couple of years an initiative by the Government of India has been gaining momentum which could have far reaching implications for its residents. In early 2009, the Unique Identification Authority of India (UIDAI) was setup to issue universal ID’s (UID), they have called the program “Aadhaar” which means foundation or support. However, most people still refer to the program as UID. This is the one rare initiative from the Government of India that excites me because it could help the people that need it the most – the poor.

Currently, most government aid programs are pilfered so heavily that at one point Rajiv Gandhi famously said only 15% of the benefits reach the poor. The Public Distribution System (PDS) distributes subsidized food and non-food items to India’s poor via a ration card that is issued. However, the ration cards get duplicated and “ghost” accounts are created, then the food is taken and sold on the open market. Even before the food gets to the recipients there is “leakage” all along the supply chain – transportation, warehouses and government officials.

The aim of Aadhaar is to create a central database and provide proof of identity when using government services. Aadhaar will be technologically advanced in that it will be a combination of a person’s iris scan, fingerprints, photo and optionally include demographical information such as age, sex, address, father, mother, etc. With an iris scan you can be sure that only the receipt of the food or cash-subsidy is receiving the benefit and not a middle man, which is often the case today. Aadhaar has an ambitious goal of issuing 600 million numbers in the next 4 years. The Aadhaar number will be 12 digits long and oddly enough there is no card, it’s a piece of paper with a number. Users would authenticate their identify via fingerprints and an iris scan hence no need for a smart ID card. Aadhaar will be useful in 5 areas – 1. food distribution via PDS; 2. National Rural Employment Guarantee Act (NREGA) ; 3. health services; 4. education; and 5. financial services. Number 5 excites me the most since it might put an end to the poverty tax that so many citizens of India face on a daily basis.

The poverty tax is everywhere if you are poor in India.  If someone wants a loan they can’t goto their local bank because they don’t have the required documentation, which leaves them to the loan sharks where the interest rates charged would bring a tear of joy to any investment banker. When you receive money from someone you can’t put that into a bank account so you lose out on the interest that you might have received from a bank. If you receive a pension, you might have to pay a “fee” to the clerk to speed up the transaction. Same issue with food, subsided kerosene, government jobs, etc…if you want something you have to pay a fee.  That fee hurts more if you earn less and hence it’s called the poverty tax.

Financial institutions are thrilled at the prospect of Aadhaar because they can start to market their products to potentially 600 million new customers. With the large number of mobile phone users it also means that banks don’t have to setup branches in every corner of the country, they could use the mobile phone to keep track of balances instead of the old school passbooks. Near-field communications (NFC) is probably a couple years away from being adopted by the mass market but that is potentially another game changer in the way people transact in India.

Aadhaar would also streamline the plethora of numbers that many middle class people need to keep track of. If you are a taxpayer and an investor you might have several numbers such as PAN for taxes, TAN, TIN, MIN, DIN and folio numbers for investing in mutual funds. The reason for multiple numbers is because each group has a vested interest in keeping their numbering system because it creates jobs for them and more importantly they have access to the money flow. Knowing where the money is coming and going is a source of information that can be used against an individual.

For Aadhaar to work it needs to be made mandatory, currently it’s optional and that might be more of a political move. If Aadhaar was mandatory on day one then people would jump to the next logical step – using Aadhaar for voting. And changing anything to do with the voting process would absolutely disrupt the status quo and would be shot down by politicians in a heart beat. However, once end-users start craving for the “optional” Aadhaar then nothing would stop its mass adoption which would make it mandatory in the end. The second thing that needs to happen is that Aadhaar should be an acceptable form of Know Your Customer (KYC), this would help financial institutions, mobile phone providers or really any one that needs to authenticate an individual for a companies product or service. Since the government would have validated someones identity then why go through the process again, this would also lower the acquisition costs for companies and allow them to provide “no frills” type services.

Facebook Connect in the virtual world has turned into the de-facto standard for identify, whereas Aadhaar has the same potential in the real world for India. Aadhaar could be the catalyst to open up many more markets for companies and also bring products to a set of customers that have previously been excluded from financial services.

The above article was syndicated on VCCircle.com.

Update:
June 4 – View a quick 10 slide summary about Aadhaar (via SlideShare)
May 18 - India’s Poor Yet to Reap Full Benefits of Its Anti-Poverty Programs (World Bank report)
April 30 – India’s $9 Billion Jobs Program Fails its Poor (WSJ link)

The 8th edition of the Mumbai Marathon took place on Jan. 16. This was the 4th Mumbai Marathon that I have participated in and each year it gets better and better, not only from an excitement perspective but also my running time.

This year I completed the half marathon (13.1 miles, 21.1km) in 2:01:26, I was absolutely shooting for sub-2′s, but couldn’t pull it together during the last 4 kilometers to pickup some speed…next year.

My Mumbai half-marathon timings are:

2011 – 2:01:26
2009 – 2:07
2008 – 2:16
2006 – 2:16

What really helped me this year was using the RunKeeper app on my iPhone. RunKeeper was constantly giving me real-time stats on my run and I was able to speed it up or slow it down based on the information. I would highly recommend the program if you are planning to run a 5km or a full blown 42km marathon. You can see my RunKeeper stats for my 2011 run. The website tracks all your runs and aggregates the data and I can see this turning into a much bigger platform then it currently is.

Dear President of the United States (POTUS),

How are you? I believe you will be visiting India very soon and more precisely you will be in Bombay (yeah, I still call it that) on Nov 6-7. I would have loved to meet but I’ll be out of town and thus the letter.

Had we met, I probably would have asked what are you doing in India? I voted for you and still have a refrigerator magnet of your slogan “Yes We Can.” Your campaign platform was about “change” but when I talk to most of my friends in the US, they say the only change is what’s in their pockets. I think it’s great you are nation building with India but seriously what are you doing about the US.

So far the only “victory” I see is the health care reform bill. And when I talk to people in the medical community they all the say the same thing – more money down the toilet. As far as TARP is concerned it appears it was a way to help the bankers line their pockets and that’s it. People are still loosing jobs, homes and their sanity.

Anyways, I don’t want to be a downer because I’m sure you get enough of that back home from your friends over at Fox News.

Since I won’t be around, I’ll give you some pointers during your stay in Bombay:

• As you land into Bombay you can compare and contrast the landing into Los Angeles. In Bombay all the blue you see are sheets of blue tarpaulin (tarp) since there are many slums around the airport. In LA all the blue you see are the pools in people’s backyard
• If you see guys holding hands it’s not because they are professing an alternative lifestyle but instead a sign of friendship, not sure why they just can’t fist bump
• You might notice red stains on the road, that is not because some fight took place but because of India’s love affair with paan – which is a tobacco and when mixed with some other stuff creates the colorful stain

I really hope you make an effort to come to Bombay every year because I have NEVER seen the locals at the BMC/MCGM work so hard. They are painting, scrubbing, planting, trimming and making this city look great for you. Normally, the MCGM is about as effective as the SEC which means nothing gets done and it’s all about passing the buck – but because of you, real “change” is happening for us folks that live in Bombay.

Enjoy your travels,

Manish Jain
US Citizen

It appears we are weeks away from private carriers finally launching 3G services in India. The first revolution was voice calls with the launch of mobile networks in India. What really led to mass adoption was a price war that was kicked off by Ambani’s Reliance Communications which led to very low ARPU’s for carriers.

Will data be the next revolution for the mobile carriers? Personally, I think the next revolution will occur if the carriers price their offering at what people currently pay for their voice services. So if the average ARPU is currently Rs. 200 per month, I would expect plans to start at that price.  More importantly they really need to let the bits fly through the networks and offer an unlimited data plan or have a “fair-use” policy that starts at 30GB or so per month.

Yes, that sounds like a pie in the sky wishlist but if they misprice on the initial launch they will loose a lot of pent up demand since everyone is expecting low prices. I don’t expect a carrier like Tata Docomo to throw down the pricing gauntlet. Thankfully, Mukesh Ambani is back in the telecom space after acquiring a 95% stake in Infotel for USD 1 billion dollars.  Infotel has a WiMax license for the entire country and could offer low costs data plans and thus push the prices of 3G services down as well.

The first revolution for voice is still talked about and I hope it continues with data or the Indian mobile market will end up being a one hit wonder.

Five years ago today I boarded a flight from LAX and headed to Bombay. At the time two things were running through my head, a short term and long term goal – 1. I’m only going to be in India for 6 months to set things up 2. It will be a great story in Forbes or Fortune magazine 5 years from now.

Funny how life happens when you are busy planning. My “6 months in India” has turned into an indefinite stay and no complaints about that.

Looking back at everything that has happened it has been one roller coaster of a ride and it ain’t over yet. This would be a good time to talk about some of it but the Forbes/Fortune story is still being written.  A sneak peak – love, bankrupty, government ordered shutdown, fastest selling commodity hedge fund, India’s biggest investor and much more…