If this was proposed for a 'developed' country, there would rightly be uproar from civil liberties groups, citizens etc. But because it's happening in an 'underdeveloped' country, it's somehow acceptable. I understand the challenges faced by the Indian government in providing services to a such a huge population but this approach is open to rampant abuse by the 'middlemen' and by elements in the government itself. Any self-respecting 'security' agency would get their tentacles into something like this asap. Doubtless, they're already involved in the implementation on the quiet.
[edit: corrected typo]