This will allow massive credit expansion in India, as being trackable means lending companies can more easily identify people. Same thing has happened in the Philippines over the last 10 years, easy credit has exploded.
The "ration card" is another, nearly universal, identifying document in India which serves another purpose: this card is mandatory if its owner wants to get grocery at affordable (I hope!) rates from the government's Public Distribution System.
Village loan sharks love to take this card as security for their cut-throat loans to the poor, because they know that its owner will try their level best to not jeopardize their access to this card: no card means the kids starve. Since the ration card is issued by the government, it is (well neigh) impossible for their clients to get a duplicate issued, as well.
This new thing will probably end up as one more piece of paper/plastic for the poor to spend their life redeeming from the shylocks.
The idea is to solve exactly what you are describing (whether the execution actually matches it or not is a separate matter).
The 'ration card' provides both, a way to check identity and a way to keep track of rations disbursed.
By separating out identity part and attaching it to your biometric data, at least theoretically, if someone holds your ID card hostage, you can go to the issuing authority, and get another one issued, because you can prove your identity without any form of paper.
There will be huge problems with implementing this, as any large system tends to have. But once the dust settles, it should make life much more convenient for the poor and everyone else.
Also previously there were cases where ration cards were applied and approved (by middle men) for people who did not even apply for one. The middle men took the subsidized goods and sold it in the market at higher rates. Even if with the new system the middle man can do the same stuff, but it gets difficult as you have to prove the identity.
And this is a good development? Institutionalized credit is merely a market-based mechanism for the gradual erosion of freedom. It brings economic gain in the short term, as people are able to step outside the prejudices restricting their informal local credit. However for the long term, just take a look at the debt treadmill most everyone in the US is on.
I'm not sure whether OP thinks this is a good thing or not, but I certainly hope not. Being universally trackable by government is one of the most evil things I can think of right now. Once this starts, we know what's coming in a few years - an RFID in every person (or similar, possibly more advanced technology). Say goodbye to individual freedom.
I'd thought about elaborating to head off this comment.
This is true when credit first arrives on the scene. People looking for loans are thinking in terms of paying the money back, and the benefit they'll have from temporary use of the money. Over time, this extra money drives prices up (especially with collateralized loans), and causes credit to be increasingly necessary to even afford the items in question. People then think in terms of economic rent, with little intention of paying back the principle. (See: US housing market).
It's still true that in every instance, one ultimately chooses to borrow the money. It's just that it becomes impossible to lead a 'normal life' without doing so.
As the Guardian article linked in the Mises article points out:
Grameen's tactics suffer from five fatal assumptions.
First is the idea that poor should be self-employed rather than work for wages. That is contrary to the whole history of successful economic development.
Second is the idea that loans are the main financial service needed by the poor, whereas they really need savings and insurance.
Third is the idea that credit is what builds enterprise, whereas the truth is that entrepreneurship and management are more important.
Fourth is the idea that the non-poor don't need credit, whereas the truth is revealed in market-based banking: higher incomes can handle higher debt.
Fifth is the idea that microcredit institutions can become self-sustaining, whereas all experience shows that new enterprises in poor areas that are built on credit alone rarely emerge from dependency.
Sure, everyone "ultimately chooses" to borrow the money, just as in the most egregious loansharking operation, and they end up living under threats of broken legs after being sucked in. Only now, 1.2 billion people will be trackable forever by Big Legbreaker.
I am serious about Grameen being one of the prime movers here.
From their site:
By 2013, with the help of our commercial partners and philanthropists that support our work, we envision that, 100 million poor people in India will have access to a full range of financial services and technologies that will progress them out of poverty.
India is home to one-third of the world’s poor, who make up 42 percent of the more than 1 billion Indian people.
Out of India's population, 76 percent — 800 million people — live below the poverty line of $2.50 a day.
About 87 percent of poor rural farmers still do not have access to formal credit. Although Indian MFIs reach an impressive 15 million borrowers, total demand estimates are more than 90 million poor.
In line with its commitment to help alleviate poverty, Grameen Foundation established Grameen Foundation India (GFI) in 2010 as a wholly owned subsidiary.
For who?
The people living on 20 rs a day? Or near the poverty line?
Well that's not how it's being used.
For the middle class, that system is in place already. Heck credit growth is pretty aggressive already, if anything steps are being taken to reduce its growth.
So that's an overall goal which is being solved elsewhere and doesn't need A terribly designed system to control identity.
And you trust the govt with it?
Currently it's been made compulsory to own one of these to get gas, in one state.
This is after the charter stated that no service would be made such that it required per ownership of such a card.
