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By:

Sumit Ranjan Das

21 August 2024 at 4:08:59 pm

UPI Must Stay Free

AI Generated Image Yesterday, I went to my neighbourhood shop to buy aloo chop and vegetable chop to eat with muri. I reached for my phone to pay by UPI, as I do for almost everything. The shopkeeper stopped me. “This is the last time we’ll accept UPI. From tomorrow, CASH ONLY.” I didn’t argue or explain that payments up to Rs. 2,000 remain free. It would have been a waste of breath. So I let it go, but I kept thinking about it on the walk home because I think I know what he was afraid of....

UPI Must Stay Free

AI Generated Image Yesterday, I went to my neighbourhood shop to buy aloo chop and vegetable chop to eat with muri. I reached for my phone to pay by UPI, as I do for almost everything. The shopkeeper stopped me. “This is the last time we’ll accept UPI. From tomorrow, CASH ONLY.” I didn’t argue or explain that payments up to Rs. 2,000 remain free. It would have been a waste of breath. So I let it go, but I kept thinking about it on the walk home because I think I know what he was afraid of. Picture a vegetable vendor with a pushcart at the corner of your lane. Call him Ramesh. He studied up to Class 8. Two years ago, he put a QR code on his cart because someone told him one thing: “Bhaiya, UPI is free. The money comes straight to your bank.” That one sentence did more for Digital India than any seminar. No card machine, no fee, no paperwork. Now tell Ramesh that a Merchant Discount Rate (MDR) may apply to specified transactions above Rs. 2,000, subject to exemptions. He won’t argue. He will put up a board: CASH ONLY. MDR is the fee a merchant pays to accept a digital payment, and UPI has been free for merchants since 2020. The new framework proposes a fee of 0.4 per cent on specified merchant transactions above Rs. 2,000, with a cap of Rs. 300 on transactions above Rs. 75,000. Payments up to Rs. 2,000 remain free. Person-to-person transfers are not covered, and under the announced plan, customers are not charged directly. On a Rs. 10,000 merchant payment, the merchant would pay Rs. 40. Small merchants receiving less than Rs. 1,00,000 a month through UPI were proposed to be exempt. One report adds that the committee was reportedly considering exempting businesses with annual turnover of up to Rs. 40 lakh. On October 13, the National Payments Corporation of India (NPCI) said the fee, due to be implemented on October 15, would be introduced immediately after Diwali, on a date to be notified separately. The decision merley postpones the fee. Consider Ramesh again. Suppose he sells Rs. 5,000 worth of vegetables a day, mostly through payments of Rs. 30 to Rs. 300. That amounts to around Rs. 1,50,000 a month, or roughly Rs. 18 lakh a year. Every one of his payments is below Rs. 2,000, so under the proposal, they remain free. But his monthly receipts exceed Rs. 1 lakh, which means he cannot simply assume that the small-merchant exemption covers him. Who will tell him? Who will explain it in Bengali, Hindi or Maithili, at his cart, in two minutes? A vendor who cannot understand the rules will choose the option that feels safest: cash. Cash is not the enemy. But for a small merchant, it also means hunting for change and losing customers who do not have it, facing the risk of theft, loss and counterfeit notes, spending time counting, storing and depositing money, and having fewer digital records to show a bank when seeking credit. “Free” does not mean UPI costs nothing to run. Security, fraud control, banking systems and customer support all require money. In March 2025, the Union Cabinet approved an incentive of Rs. 1,500 crore for low-value BHIM UPI merchant transactions for the financial year 2024–25. Genuine welfare must never be treated as a piggy bank. Every rupee, whether spent on welfare or infrastructure, should deliver greater value. Five measures would help keep UPI simple. First, person-to-person UPI transfers must remain free. Sending money to family should never come with an unexpected charge. Second, protection for small merchants must be straightforward. Thela-walas, tea stalls and kirana shops need one clear exemption, not five clever ones. Third, UPI must be funded transparently. The government and relevant institutions should publish what it costs to run the system, how much public money supports it, how much any proposed fee collects and what results follow. Fourth, the rules must be explained in local languages. A one-page notice or a short voice message through a payment app would reach Ramesh faster than a 20-page circular. Finally, the impact must be measured before any fee is extended. Changes in small-merchant acceptance and transaction volumes should guide the next step. India did not build UPI by making it clever. It built it by making it simple and free. (The writer is a Cost and Management Accountant and founder of TaxoDas. Views personal.)

Washington’s Risky Tango with Pakistan

Oct 6, 2025
4 min read

America’s renewed embrace of Pakistan may be aimed at countering China, but it risks reviving ghosts that may return to haunt the US.

Whenever Washington turns its gaze back to Islamabad, history usually repeats itself. The recent signs of a U.S.–Pakistan thaw - amplified after India’s stunning success in Operation Sindoor badly mauled Pakistan - suggest that a familiar choreography is underway. The ‘Pakistan–U.S. tango,’ as some analysts call it, appears to mark a new phase in America’s South Asia policy under Donald Trump’s second presidency.


The buzz in Washington and Islamabad alike has been loud. A widely publicised meeting at the Oval Office, attended by President Trump, Vice President J.D. Vance, Secretary of State Marco Rubio, Pakistan’s Prime Minister Shehbaz Sharif and Army Chief Gen. Asim Munir, left few doubts that the two sides are back in conversation. Reports suggest that a range of bilateral matters were discussed - from the opening of Pakistan’s rare-earth deposits to U.S. mining firms, to cooperation on counter-terrorism. India, one can safely assume, figured prominently in the subtext.


Uncomfortable echoes

For India, this re-engagement carries uncomfortable echoes of the past. Commentators critical of the Modi government have interpreted the development as an alleged failure of New Delhi’s diplomacy and a diminishment of India’s geopolitical influence.


From the American perspective, this pivot towards Pakistan has a clear strategic calculus. The U.S. seeks to counterbalance China’s widening footprint in the region - from Gwadar port to the China–Pakistan Economic Corridor - and perhaps to loosen Beijing’s hold over Islamabad. Yet this approach, while tempting on paper, risks undermining India’s stature and the logic of the Indo-Pacific partnership that Washington itself helped shape.


Pakistan’s dependency on Beijing remains entrenched. China remains its largest creditor, investor, and weapons supplier. A U.S. attempt to re-court Islamabad, therefore, may serve only to give Pakistan fresh leverage - both with China and, more dangerously, against India.


Double standards

A reinvigorated U.S.–Pakistan partnership could embolden Islamabad to act with greater confidence in its dealings with New Delhi, particularly on cross-border terrorism. While Washington praises Pakistan’s cooperation against groups such as ISIS-K and the Balochistan Liberation Army (BLA), its silence on Pakistan-backed anti-India outfits like the Lashkar-e-Taiba and the Jaish-e-Mohammed speaks volumes. This double standards on part of the US of overlooking inconvenient facts when strategic expediency demands it is hardly new


Equally troubling is the possible resumption of military aid or F-16 component supplies to Pakistan, which would alter the region’s delicate military balance. For India, now one of America’s major defence partners, such moves cut against the grain of recent trust-building.


Then there is the naval dimension. Islamabad’s proposal for U.S. involvement in developing the Pasni Port in Balochistan, barely 300 kilometres from India’s Chabahar Port in Iran, adds another layer of complexity to maritime competition in the Arabian Sea. The project, if realised, would insert American commercial and security interests uncomfortably close to India’s own sphere of influence.


For decades, Washington has treated Pakistan as a convenient pressure valve in its dealings with India. The current rapprochement threatens to revive that tendency. By warming to Islamabad, the U.S. gains a tool to nudge India on three key fronts.


First, it can constrain India’s pursuit of strategic autonomy which has been a policy cornerstone since the Cold War. New Delhi’s refusal to become a formal ally has long frustrated successive U.S. administrations. Engagement with Pakistan could thus serve as a quiet reminder that autonomy has limits.


Secondly, the U.S. hopes to disrupt India’s continued trade with Russia. Sanctions and tariffs against Indian firms over oil imports and technology transfers have been justified in Washington as upholding the global rules-based order. Yet no such censure applies to Pakistan, the EU, or even the U.S. itself in their commercial dealings with Moscow.


More broadly, America’s dual embrace of both India and Pakistan risks eroding the credibility of its rhetoric. Calling India a “comprehensive strategic partner” rings hollow when Washington simultaneously revives military cooperation with Islamabad.


India’s Imperatives

For New Delhi, the response must be guided by prudence rather than paranoia. India has weathered such oscillations before. It should continue to pursue its long-standing objective: to maintain strategic autonomy while engaging with all major powers on equal terms.


That means that India must continue to assert its independent foreign policy, resisting the temptation to be drawn into any singular alliance structure. It must focus relentlessly on strengthening its economic and military foundations. A $4 trillion economy with deep technological capabilities offers far more long-term value to Washington than a financially strained Pakistan. Over time, the logic of scale will reassert itself.


India should practise cautious engagement by monitoring U.S.–Pakistan developments without public rancour. Diplomacy, not diatribe, will better protect India’s interests.


Each time Washington returns to Islamabad, the pattern unfolds predictably. Enthusiasm gives way to frustration and disappointment. The U.S. relied on Pakistan during the Cold War, only to be disillusioned by its duplicity. After 9/11, it lavished billions in aid, only to see much of it diverted to support militant proxies. The present ‘tango’ risks ending on the same discordant note.


For India, the imperative is to stay the course: to safeguard its autonomy, deepen its partnerships with multiple powers, and remind Washington of where its true long-term interests lie.


The United States may flirt with Pakistan to score tactical points against China, but India remains the strategic prize - a vibrant democracy, an ever-burgeoning market and a maritime power whose rise is central to the balance of Asia. For history suggests that America’s dance with Pakistan rarely ends well.


(The author is a retired Naval Aviation Officer and a defence and geopolitical analyst. Views personal.)

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