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Correspondent

21 August 2024 at 10:20:16 am

Fee Signal

The government’s decision to create a legal framework for levying charges on UPI transactions has understandably triggered concern, even though it insists that ordinary users and small merchants will continue to enjoy free payments. The proposed amendment does not impose a fee on UPI today. But it removes the statutory barrier to one being imposed in the future, making the government’s reassurance less than the final word. The government argues that this is a measure for UPI’s long-term...

Fee Signal

The government’s decision to create a legal framework for levying charges on UPI transactions has understandably triggered concern, even though it insists that ordinary users and small merchants will continue to enjoy free payments. The proposed amendment does not impose a fee on UPI today. But it removes the statutory barrier to one being imposed in the future, making the government’s reassurance less than the final word. The government argues that this is a measure for UPI’s long-term sustainability. The world’s largest real-time payments system, which processed 2,366 crore transactions worth Rs. 29.9 lakh crore in July alone, cannot indefinitely depend on subsidies as transaction volumes, cybersecurity requirements and infrastructure costs rise. A nominal Merchant Discount Rate on larger merchant transactions, it says, would help create a more sustainable ecosystem without burdening ordinary users. That argument has merit. But so does the concern that a payment system which became a national habit precisely because it was cheap and frictionless should not slowly acquire a price tag. Once the legal machinery for charging exists, there is no guarantee that the boundary between large merchants and small ones, or between merchants and consumers, will remain permanently fixed. The Finance Minister has clarified that any Merchant Discount Rate will apply only to a limited set of merchant transactions above a threshold and will be nominal, well below card-payment rates. The details will eventually be decided by the UPI and Services Steering Committee headed by the National Payments Corporation of India. In other words, there is no charge on the table for the ordinary UPI user today. But there is now a legal mechanism for charges to be introduced tomorrow. That is precisely why any alarm, though exaggerated, cannot simply be dismissed. The government, through its clarification, has reassured that UPI’s free-to-consumer model remains intact. The important issue is whether its financing model can evolve without undermining the habits that made it revolutionary. UPI succeeded partly because it made digital payments cheaper and simpler than alternatives. There is also a larger principle at stake. UPI is not merely another commercial payments platform. It is the product of public investment, regulatory architecture and private innovation. The state should therefore be wary of treating its sustainability as an ordinary market problem. The sensible answer lies between free-for-all subsidies and indiscriminate fees: transparent thresholds, genuinely low MDRs, strong protection for small merchants and an absolute firewall around ordinary consumers. The government should publish the economic case for any future charge, including its effect on merchants and consumers. UPI was built on trust as much as technology. The government is right to protect its remarkable achievement. It should remember that keeping UPI free is not merely a political promise. It is part of the product.

A Diplomatic Detour

The Japanese Prime Minister’s decision to skip Assam is a setback for the Northeast, but not for the larger India-Japan partnership.

India and Japan share one of Asia’s most understated yet enduring partnerships. Long before the relationship acquired strategic significance, it rested on the quiet foundations of culture and civilisation. Buddhism travelled from the Indian subcontinent to Japan over many centuries, leaving an imprint that still shapes Japanese society. In the modern era, that cultural affinity has been reinforced by expanding economic ties, institutional cooperation and an increasingly convergent strategic outlook.

 

Strong Bonds

The architecture of this relationship is extensive. Organisations such as the Indo-Japanese Association have nurtured cultural and intellectual exchanges since the 1950s, while the Indo-Japanese Economic Cooperation Council has promoted investment, technology transfer and commercial collaboration. Diplomatic forums on both sides have steadily deepened mutual trust, reflecting a shared commitment to peace, stability and prosperity across the Indo-Pacific.

 

Security cooperation has become an equally important pillar. A turning point came in 2008, when India and Japan signed their Joint Declaration on Security Cooperation during Prime Minister Manmohan Singh's visit to Tokyo. Since then, bilateral ties have expanded to include regular “2+2” ministerial dialogues, defence exchanges, coast guard cooperation and joint military exercises. The Acquisition and Cross-Servicing Agreement, which entered into force in 2021, has further strengthened operational cooperation between the Indian armed forces and Japan’s Self-Defence Forces. Together with their collaboration through the Quad, these initiatives underscore how the two democracies increasingly view each other as indispensable strategic partners.


The diplomatic warmth between the two countries, however, predates the present geopolitical moment. One of the earliest symbols of goodwill came in 1949, when Prime Minister Jawaharlal Nehru gifted an Indian elephant to Tokyo’s Ueno Zoo. At a time when Japan was struggling to recover from the devastation of the Second World War, the gesture carried emotional significance far beyond diplomacy. Three years later, India signed one of the first post-war peace treaties with Japan, formally establishing diplomatic relations on April 28, 1952.

 

India’s exports of iron ore contributed to Japan's post-war industrial recovery, while Japan gradually emerged as one of India's most dependable development partners. Prime Minister Nobusuke Kishi’s visit to India in 1957 marked another milestone, paving the way for decades of Japanese official development assistance. Today, that legacy is visible in projects ranging from metro rail systems to the Mumbai-Ahmedabad high-speed rail corridor, one of the largest Japanese-backed infrastructure investments overseas.

 

Against this backdrop, the decision by Japanese Prime Minister Sanae Takaichi to cancel the Guwahati leg of her July 2026 India visit has understandably generated disappointment, particularly in Assam. The annual India-Japan summit will now be held entirely in New Delhi. Official explanations have cited parliamentary commitments in Tokyo and scheduling constraints. Diplomacy often leaves little room for certainty, and itinerary changes are not uncommon. Yet symbolism matters in international relations, especially when a region is striving to position itself as a gateway to Southeast Asia.

 

Past Incidents

This is not without precedent. In 2019, then Japanese Prime Minister Shinzo Abe was forced to cancel his visit to Assam amid protests over the Citizenship (Amendment) Act. That cancellation deprived the Northeast of an opportunity to showcase its growing strategic relevance within Japan’s vision of a free and open Indo-Pacific. It also served as a reminder that domestic political turbulence can sometimes carry unintended diplomatic costs.

 

The latest cancellation comes at an equally delicate moment. Assam has spent years projecting itself as an emerging investment destination. Improved law and order, expanding infrastructure and greater connectivity have encouraged the state government to court foreign investors with unusual vigour. Preparations for the Japanese delegation reflected those ambitions. Guwahati witnessed beautification drives, road improvements and hospitality planning. Japanese officials reportedly spent weeks assessing the local ecosystem, infrastructure and investment climate ahead of the proposed visit.

 

The economic stakes were hardly insignificant. Prime Minister Takaichi was expected to be accompanied by executives from more than 50 Japanese companies and organisations, including Suzuki Motor. Discussions were expected to cover industrial investment, energy resilience initiatives and financing mechanisms that could support infrastructure development in India and Southeast Asia. For Assam, hosting such a delegation would have provided a valuable opportunity to present itself not merely as a peripheral state but as a strategic hub connecting India to East and Southeast Asia.

 

Assam Chief Minister Himanta Biswa Sarma has understandably expressed disappointment while indicating that the state would seek greater clarity from the Ministry of External Affairs. Such restraint is prudent. More importantly, one cancelled visit should not be mistaken for a weakening of Japanese interest in the Northeast.

 

Indeed, there are indications that a high-level Japanese business delegation may still visit Assam separately. If that materialises, much of the economic momentum generated by the preparations could yet be preserved. The larger trajectory of India-Japan relations remains firmly positive, driven by strategic necessity as much as by historical goodwill. Both countries seek resilient supply chains, diversified manufacturing, secure maritime routes and greater stability across the Indo-Pacific.

These interests transcend the calendar of summit diplomacy.

 

For India, however, the episode offers a useful lesson. The Northeast has acquired unprecedented geopolitical significance as New Delhi's gateway to ASEAN and as an integral component of the Act East policy. Maximising that potential requires not only infrastructure and connectivity but also careful diplomatic management and political stability. Foreign investment is ultimately attracted by predictability as much as by opportunity.

 

While a cancelled visit may disappoint, but it need not derail a partnership built patiently over seven decades. If both New Delhi and Dispur draw the right lessons, the next Japanese delegation may arrive not merely as honoured guests but as long-term partners in the economic transformation of India’s Northeast.

 

(The author is a retired naval aviation officer and a defence and geopolitical analyst. Views personal.)

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