DISCUSSION March 9, 2013 vol xlvIiI no 10 EPW Economic & Political Weekly 78 Response to ‘A Cost-Benefit Analysis of UID’ Sumathi Chandrashekaran, Shekhar H Kumar, Smriti Parsheera, Ila Patnaik, Madhavi Pundit, Suyash Rai, Ajay Shah Email: ajayshah@mayin.org A debate on the study “A Cost-Benefit Analysis of Aadhaar” conducted by the National Institute of Public Finance and Policy which was discussed in the EPW of 2 February 2013. T his is in response to Khera (2013) (“the comment”), which criticises a cost-benefit analysis of Aadhaar ( NIPFP 2012) (“the study”) conducted by the National Institute of Public Finance and Policy ( NIPFP ). The comment repeatedly takes quali- fying statements from the study that were explicitly presented as limitations to the research and offers them to its reader as failings of the study. To a per- son reading only the comment and not the study, it would appear as though the authors of the study were either unaware of these impediments, or were trying to hide them. The comment’s central theme is to fault the study for being based on “un- realistic” assumptions. The study is elaborately careful in pointing out its limitations. For instance, it acknow- ledges that a “full-fledged cost benefit analysis of Aadhaar” is difficult for two reasons: first, many gains from Aadhaar are difficult to quantify because they are intangible; and second, even if in specific schemes there may be tangible benefits, the information available on those schemes does not permit a precise quantification of those benefits. The comment’s charge of the “conclusions of this study [having] a fragile basis” chooses to expressly ignore what is already stated in the study, and mis- leads a reader into believing that the basis of the study was deliberately misrepresented. Faced with limitations in the existing statistical system and research litera- ture, our strategy was to obtain a con- servative result through two elements. First, many elements of the benefits which are not presently quantifiable are set to zero. Second, assumptions are shaded downwards when compared with the values seen in published studies, in acknowledgement of the weaknesses of the existing published studies. 1 Specific Points We now turn to some specific points raised in the comment. The comment raises doubts about the manner in which integration with Aadhaar can help curb corruption in the delivery of benefits un- der the Mahatma Gandhi National Rural Employment Guarantee Act ( MGNREGA). For NREGA to work effectively, two ele- ments need to be addressed: there should be a mechanism to identify actu- al workers and a way to make accurate wage payments to them. Automating the maintenance of muster rolls, and carry- ing out authentication through Aadhaar, will help deal with corruption arising from embezzlement of funds on account of fake names and inflated days of work. This, coupled with use of Aadhaar- enabled bank accounts, will ensure that the wages are paid directly to the bank account of the worker whose presence is recorded in the muster rolls. The comment identifies three forms of wage corruption in NREGA – collu- sion, extortion and deception – and concludes that Aadhaar can help with only the last category, where a workers account is operated without her or his knowledge. However, this overlooks the benefits that may emerge from real-time monitoring of NREGA through Aadhaar. The study envisages that Aadhaar can be used not just to monitor the number of workers engaged in a project but also to sanction and track the materials used for the work. By comparing actual project performance with the number of workers and work days required, and the quantity of materials needed, the government will be better positioned to check the problem of collusion (i e, wage payments should correspond with the actual completion of work). The comment also suggests that the assumptions in the study are not “con- servative”. The comment points to a social audit in Andhra Pradesh 1 that suggests 2% leakage, but critiques the study for assuming a national leakage of 7%. The study has steered away from relying