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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.

From Diplomacy to Geoeconomics

India and Indonesia are forging a partnership designed for an era defined by resilient manufacturing, critical minerals and digital connectivity.

 The age when bilateral ties were judged by trade volumes and ceremonial diplomacy is fading. Today, the strength of a partnership is increasingly determined by who controls critical minerals, builds trusted digital networks and secures resilient supply chains. Prime Minister Narendra Modi’s recent visit to Indonesia captured this new strategic reality. The ambitious economic agreements signed during the visit covering cooperation on critical minerals, industrial cooperation, digital payments, artificial intelligence, education and maritime connectivity, signify a partnership that is expanding well beyond traditional diplomacy.


These are part of the larger transformation of India’s approach to Southeast Asia. Amid the reconfiguration of global supply chains and the Indo-Pacific’s emergence as the centre of economic competition, India is seeking partnerships that strengthen economic security, diversify dependencies, and support its long-term manufacturing and technological ambitions. Against this background, Indonesia is emerging as a crucial partner because of its abundant resources, growing economy, and strategic location. Taken together, the agreements signed during the visit reflect the emergence of a comprehensive geoeconomic partnership with the potential to redefine the trajectory of India–Indonesia economic relations.


Vital Role

Indonesia has a special role in New Delhi’s economic and strategic calculations. As the largest economy in Southeast Asia and the fourth most populous country in the world, it is a major engine of regional growth and a powerful voice within ASEAN. Its importance, however, extends beyond market size as Indonesia’s huge reserves of vital minerals including nickel, a key component in EV batteries, has made it an important player in the global shift to clean energy. Its strategic location, specifically close to the Strait of Malacca, also adds to the importance of Indonesia as a collaborator in maintaining secure and resilient trade connectivity in the Indo-Pacific.


Deeper engagement with Indonesia is in line with multiple national priorities for India. It reinforces the objectives of the Act East Policy, complements the ambitions of Make in India, and supports supply chain diversification efforts amid growing geopolitical and economic uncertainty. As nations look for reliable partners for technology, manufacturing and resource security, Indonesia offers India an opportunity to build a partnership that extends beyond its longstanding trade and investment collaboration. The agreements signed during the visit should be viewed not as isolated sectoral initiatives but as the building blocks of a larger geoeconomic partnership.


Industrial Cooperation

Cooperation on critical minerals and industrial development forms the cornerstone of the new economic partnership between India and Indonesia. As countries race to secure the raw materials required to produce electric vehicles, renewable energy technologies, and advanced manufacturing, critical minerals have assumed a strategic importance comparable to that of oil. Indonesia, which is home to some of the world’s largest nickel reserves, occupies a pivotal position in global battery supply chains. For India, whose clean energy transition and manufacturing targets depend on reliable access to such materials, engagement with Indonesia promises to bolster long-term supply chain resilience.


Yet the significance of the partnership extends beyond resource security. The agreements on industrial cooperation and steel production reflect a shared desire to move up the value chain, rather than remain confined to exporting raw materials or importing finished goods. This aligns with India’s broader objective of expanding domestic manufacturing under the Make in India campaign while capturing a greater share of regional production networks. By combining Indonesia’s resource endowments with the burgeoning industrial capabilities of India, this partnership has the potential to foster more resilient and diversified value chains while reducing vulnerabilities in an increasingly fragmented global economy.


Digital Partnership

Beyond critical minerals and manufacturing, the agreements also highlight India’s growing emphasis on digital and technological cooperation as a pillar of economic diplomacy. Cooperation in digital payments, artificial intelligence, and Digital Public Infrastructure (DPI) reflects a mutual recognition that technological innovation will increasingly shape economic competitiveness. India's Unified Payments Interface (UPI), now recognised as one of the world’s leading digital payment platforms, offers Indonesia an opportunity to strengthen financial inclusion, improve the efficiency of its digital economy, and facilitate greater cross-border economic integration.


This partnership also reflects India’s ambition to position its Digital Public Infrastructure (DPI) as a global public good that countries around the world can adopt and replicate as a model of governance. Instead of limiting economic engagement to trade and investment, India is increasingly leveraging its technological capabilities to deepen institutional and commercial ties with partner countries. Such cooperation will help Indonesia accelerate its digital transformation, while for India, it reinforces its position as a provider of scalable, low-cost digital solutions across the Global South. Collectively, these initiatives expand bilateral co-operation beyond traditional sectors into the knowledge economy.


By prioritising critical minerals, industrial cooperation, digital public infrastructure, and technological collaboration, the two countries are laying the foundations of a broader economic partnership that reflects the realities of an increasingly interconnected, yet fragmented, global economy. For India, the partnership advances its broader geoeconomic objectives of building resilient supply chains, strengthening manufacturing capabilities, and deepening its engagement with Southeast Asia. For Indonesia, it offers an opportunity to diversify its economic partnerships, accelerate digital transformation, and move further up the industrial value chain. However, the true measure of success will lie in its implementation. If these agreements are translated into sustained investments, stronger institutional cooperation, and deeper commercial engagement, they have the potential to redefine India–Indonesia relations and emerge as a key pillar of economic cooperation in the Indo-Pacific.


(The writer is an economics postgraduate from Jawaharlal Nehru University with research interests in economic policy, trade and global governance. Views personal.)

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