Financial Times : Nandan Nilekani

January 28, 2011

As the world looks towards uncertain times, the sun is rising in Asia. The continent’s role in the global economy will be greatly impacted by India’s rise in the coming year, for the country is all promise and potential: on the cusp of double-digit growth, witnessing a demographic dividend now coming to fruition, and experiencing rapid urbanisation that is transforming its cities.

For India, the next 10 years will arguably pose its toughest policy challenges. Inaction will mean that substantial opportunities will pass the country by. The government has already taken several strides towards inclusive development and bolder welfare solutions. Its persistence here would result in the emergence of India alongside China, as a powerful economic force for the long term, and make Asia a centre for growth in the global economy for decades to come.

India’s great economic strength lies in its demographics. Over the next 20 years, its population will see falling dependency ratios, and hundreds of millions of young people will enter the workforce. As astonishing as the numbers is the fact of where these people will come from: they will not be from India’s established growth centres – the south and the west, which are ageing; rather, the bulk of these young workers will emerge from the poorer states, in central India.

This massive increase in labour is the reason why the next few years will be so critical for the country. India’s rise has been impressive but it has not been spread evenly. It is only recently, for example, that central India has begun to experience development and investment. New Delhi’s test in the coming years will be to expand growth to communities that have remained at the margins. This will require large-scale education and health investments and widespread job creation. Such inclusion will create a cycle of growth: the push from poor people increasing their incomes and joining the workforce will contribute to productivity and, in turn, further growth.

India has not overlooked the substantial investments in education and health that it requires. The government has launched many innovative programmes: it has deregulated funding for schools, and introduced the Midday Meal programme, which provides free packed lunches to schoolchildren, helping to reduce dropout rates among the poor. Initiatives such as the Janani Suraksha Yojana for expectant mothers mirror the conditional cash transfer approach that has been a success in Brazil, Chile and Mexico.

Challenges persist, however, particularly in last-mile service delivery, and in ensuring that benefits are allocated properly. To address this, India will have to intensify its push towards accountable, innovative solutions on a large-scale.

The Aadhaar project ("Aadhaar” means a foundation) is an important part of this effort, and The Unique Identification Authority of India, of which I am chairman, is implementing the scheme. The Aadhaar identification number, which will be issued to every resident, will link to the demographic and biometric information of an individual in a central database. To verify their identity, individuals can provide their Aadhaar number, which would be authenticated by the central database in a few seconds. This is a world first: a unique identification number that enables a person to verify themselves in real-time, and anywhere within a nation’s boundaries.

For India, there is another first: never before has it attempted to acknowledge each individual in the country. This recognition paves the way for people in the most backward or remote communities to access benefits and services.

The Aadhaar infrastructure is a timely initiative, suited to the concerns of a fast-growing country. For the thousands of young workers who migrate to the cities every day in search of jobs, the system could also help people who lack documents to easily fulfil Know Your Customer (KYC) norms, giving them access to services such as banking and telecoms, and welfare entitlements. Real-time identity verification would also open up new possibilities in delivering services such as banking remotely, and at a lower cost. Such remote services are tailored to the needs of India’s difficult-to-reach countryside as well as its urban slums.

The incredible pace of India’s growth and the size of its demographic dividend are, thus, mixed blessings. The speed of the transformation India is witnessing demands an equivalent policy response. The real-time infrastructure of the Aadhaar number gives us a glimpse of the possible solutions: it would form the basis for an innovation system, enabling forms of governance that are two-way and responsive, and allow agencies to rapidly extend critical services cheaply to every part of the country, and within the next few years. The development model that it helps shape can eventually serve as a template across the developing world.

These days, when I travel across India, I come across an increasingly ubiquitous sight. Across cities, cranes tower over highways that are under construction, and skeletons of new buildings are visible across the urban skyline. In rural India, roads are being laid to connect people to urban centres and markets. The surge of infrastructure investment has made the noise of construction a familiar sound across the country. As music to usher in the new year, it feels appropriate. In the next decade, India is going to be building many institutions from the ground up. The result could be a powerful new blueprint for growth.

Nandan Nilekani is the former chief executive of Infosys, and author of "Imagining India: The Idea of a Renewed Nation”.

(The views expressed above are the personal views of the author)