Can Nilekani, the former head of Infosys, cut government bureaucracy with his visionary new scheme?
Bangalore - As a pioneer of the outsourcing industry and a co-founder of Bangalore-based Infosys Technologies (INFY), Nandan M. Nilekani was among the first to unleash the potential of modern India. Now the 54-year-old billionaire is shifting his focus to the vast majority of Indians who haven't benefited from the tech boom. For his latest scheme, Nilekani is venturing into a sector he has criticized for years: India's sprawling government bureaucracy.
On July 13, Nilekani, who has given up his board seat at Infosys, assumed a post as a $2,000-a-month government employee in New Delhi. From his makeshift office, he is launching a massive effort to provide each of India's 1.2 billion people with an ID card embedded with a microchip. Nilekani sees this decade-long project leading to a vast national database, packed with info from facial scans to financial accounts. "It's the mother of all IT projects," he says. The goal is to help bring masses of India's poor into the formal economy, where they can gain access to financial and social services.
Equally important, a smart card for every Indian could bring new accountability to government bureaucracy. Corruption siphons as much as 80% of the funds meant for India's poor, according to studies from Harvard Business School and the World Bank. In Nilekani's plan, card scans could verify that goods and money make their way from local administrators to the people.
Naturally, such a change runs against powerful entrenched interests, from corrupt contractors to government employees who leech from the system. So the political challenges Nilekani faces are every bit as daunting as counting India's people—one-sixth of humanity—and providing each with a high-tech tool. To boost the effort, India's Prime Minister, Manmohan Singh, has invited Nilekani into his government, granting him nearly the power of a Cabinet minister. The initial budget is $20 million—a mere down payment on a total that should run into the billions.
Similar efforts have stumbled. Nine years ago the government distributed voter ID cards featuring a grainy photograph of the voter, partially verified addresses, and tracking numbers. That program is now rife with corruption, with millions of illegal immigrants from Bangladesh and Nepal buying the ID cards on the black market to get food rations and residency permits. A taxpayer ID, called the PAN card, is still being rolled out, but only a fraction of the population—the 10% with bank savings or jobs in the organized sector—can get one, and fake cards go for $14 on the black market.
But one earlier pilot project shows promise. In 2007, Tata Consultancy Services, India's largest info-tech company, issued ID cards to rural workers with short-term government contracts in the state of Andhra Pradesh. It insisted that wages be deposited into bank accounts managed by the Indian Post Service. "This resulted in verification of identification and a clampdown on fund leakages," says S. Ramadorai, CEO of the outsourcing giant. What's more, the program led 2.5 million workers who were outside the formal economy to open their first bank accounts.
That number is a rounding error in Nilekani's massive scheme. In the first three years alone, 100 million cards are expected to be handed out as part of an extended pilot program. Companies from India and around the world, including Nilekani's Infosys, are hoping to win a piece of the action. (Nilekani promises to recuse himself from contract decisions.) Only as the project unfolds will we start to see if the man who redefined Indian business can leave an even larger impact on the country.