The system is based on Aadhaar, a unique 12-digit number provided to each citizen that links to basic personal details along with fingerprints and iris scans. First introduced in 2009, Aadhaar, or "foundation" in Hindi, was initially meant to be used to claim social security benefits.
The government gradually increased its scope, making it compulsory to link it with income tax numbers, bank accounts and even mobile phone services.
The constitutionality of aspects of the scheme and the law governing it had been challenged in the Supreme Court. Questions included whether it infringed the right to privacy; whether it could be made mandatory; whether the system could lead to a surveillance state; and what redress was there if a person's data was breached.
The court had clubbed together over two dozen such petitions, and after hearing all sides of the arguments, a five-judge bench handed down its decision on Wednesday.
Three judges including the Chief Justice of India Dipak Misra gave a majority judgment backing Aadhaar, while a fourth judge gave a concurring verdict and a fifth a dissenting one. The total judgement ran 1448 pages.
The majority decision said that the scheme was valid under the constitution and that it can be used for distribution of state welfare benefits.
On concerns that the lack of an Aadhaar ID was leading to exclusion of some of India's poorest citizens, the court said the loopholes admitted by the government needed to be closed but that the entire project need not be stopped.
The majority ruling also said the dignity of the marginalised outweighed the right to privacy as it served a larger purpose.
Aadhaar could not be made compulsory for access to other services, including bank accounts, telephone connections and school admissions, the ruling said. It could, however, be linked to the income tax number of citizens.
The government defended Aadhaar by noting its effectiveness in ensuring proper distribution of benefits to millions. This, the government said, has prevented siphoning of funds, which was common under older, paper-based systems.
Finance Minister Arun Jaitley said Aadhaar's link with government social security benefits was already yielding savings of 9 billion rupees (about 124 million dollars) annually.
More than 1 billion Indians have already signed up for Aadhaar, and there has been huge concern about whether Aadhaar - built on a mammoth biometric database - would lead to a surveillance state or a data breach.
The Supreme Court struck down a provision that allowed use of the data by private companies, for example mobile operators and banks.
The court said any authentication using the Aadhaar database could be stored only for six months and urged the government to introduce a robust data protection law.
"The court expressed some procedural concerns," Jaitley said at a press briefing. "Let us examine the judgement carefully."
GNA
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