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23 August 2024 at 9:59:04 pm

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain...

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain free irrespective of the amount, while merchant payments up to Rs. 2,000 remain free. Small merchants receiving up to Rs. 1 lakh a month through UPI QR codes will also continue to enjoy zero MDR. The government says roughly 96 percent of merchant transactions will remain unaffected. So, technically, the customer is exempt. MDR is not a tax collected by the government or NPCI. It is a charge within the payments ecosystem, to be shared among banks, payment-service providers and UPI application providers. But that does not make the economics irrelevant to customers. A merchant who previously accepted a large UPI payment at no direct payment cost will now have to absorb a fee. The government has advised banks to ensure that merchants do not pass the MDR on to customers. The economic reality is less tidy. Businesses ultimately recover costs through their overall pricing. Whether the new charge appears as a visible surcharge, a change in discounts or simply becomes part of the cost of doing business will depend on the merchant and the market. That is why the real beneficiaries of the new framework are not necessarily the customers alone. Payment companies, banks and other participants in the UPI ecosystem acquire a new revenue stream from transactions that were previously free. Paytm, for instance, has said the new MDR will generate additional revenue from merchant transactions that earlier carried no such charge. The money is therefore being redistributed within the payments ecosystem. Small businesses are deliberately insulated, an important distinction in an economy where street vendors and neighbourhood shops have adopted QR payments because they are cheap and frictionless. There is also a larger question. UPI became ubiquitous partly because its basic proposition was brutally simple: instant payments without a visible charge. Introducing MDR for a slice of transactions changes that economic model. The government’s argument is that UPI needs a sustainable financial architecture as its scale grows. But sustainability should not be confused with costlessness. Someone has to finance the infrastructure, security and technology behind a system processing billions of transactions. For now, the customer remains protected. The real test will be whether merchants absorb the cost without quietly transferring it through prices and whether the revenue flowing to banks and fintech companies translates into a stronger, more resilient UPI ecosystem rather than simply a new source of income for its intermediaries.

When Politics Becomes Its Own Evidence

Writer: C.S. Krishnamurthy
C.S. Krishnamurthy
1 day ago
3 min read

Tamil Nadu’s Assembly has recently offered something more revealing than a television shouting match. It has shown us what happens when allegations, evidence, history and political memory all enter the same room and nobody quite agrees on who should speak first.


The latest TVK-DMK confrontation over corruption allegations is therefore about much more than corruption. Chief Minister C. Joseph Vijay used the Assembly to accuse the previous DMK regime of corruption, referring to material from the Enforcement Directorate and the Sarkaria Commission. He alleged that contractors were made to part with percentages of contract values as “party funds”. DMK members strongly objected, sought an opportunity to respond and later stormed the Well, resulting in their removal from the House.


There is a deeper question beneath the noise. What exactly should an allegation in a legislature accomplish?


If Vijay is merely repeating an accusation for political effect, then it is little more than electoral gains. But if he is placing documentary material before the public and the appropriate investigative agencies, then the matter deserves something more serious than a political counterattack.


Equally, if the DMK says the allegations are false, or politically motivated, it has every democratic right to challenge them. But the strongest rebuttal is not simply, “You have no right to say this.” It is, “Here is why the evidence does not establish what you claim.”   

 

Political Shortcuts

A politician can make an allegation. An investigator can investigate it. A court can adjudicate it. A citizen can question it. But none of these roles should be confused.  The current Assembly drama appears to be suffering from this confusion.


Vijay may have scored a political point by bringing old corruption allegations back into the spotlight, but it’s not a judicial verdict. Similarly, DMK’s denial or outrage does not, by itself, erase the possibility that wrongdoing may have occurred.


Politics, alas, loves shortcuts.  If a rival is accused, supporters immediately become prosecutors. If their own leader is accused, those same supporters suddenly become constitutional lawyers. The same document becomes “damning evidence” when it hurts the opponent, and “political garbage” when it does not.


Our political spectacles have acquired an interesting grammar: my allegation is evidence, your evidence is allegation. 


Vijay’s government is now in the unusual position of being able to investigate allegations concerning a previous ruling establishment. That creates both an opportunity and a responsibility.


If there is credible material, investigate it properly. If wrongdoing is established, prosecute it according to law. And if the allegations do not survive scrutiny, say so equally clearly. 


There is also a warning for the DMK.  The instinctive political response to an accusation is often to attack the accuser. Sometimes that may be justified. But the public ultimately wants answers, not merely counter-accusations.


Paper Trail

If the allegation concerns contracts, party funds, tender procedures or unexplained financial transactions, the most convincing response would be documentary. Politics may thrive on rhetoric, but accountability thrives on paperwork. 


The Speaker’s handling of the recent confrontation also matters. The Assembly must remain a place where governments are questioned and opposition parties are heard. At the same time, legislators cannot convert every disagreement into a licence to disrupt proceedings. The reported eviction of DMK members shows how quickly substantive questions can disappear beneath procedural confrontation.


That is perhaps the biggest casualty in the current episode.  The public begins with a question about corruption and ends up watching a quarrel about who was allowed to speak. The original question gets lost in the noise. Tamil Nadu deserves better.


The ultimate test, therefore, is not whether TVK can shout louder than DMK or vice versa but whether truth can survive politics.


Otherwise, we may end up with a strange democratic situation where everyone produces evidence of something, except evidence of the thing actually being debated.

Vijay has opened a legitimate political question, but he must now allow evidence to do the heavy lifting. DMK has every right to challenge the allegations, but it too must answer them with facts. And the Assembly must rise above the theatre of accusation and counter-accusation.


Because corruption should not be defeated by the loudest speech, but by the strongest evidence.  And if Tamil Nadu’s new political chapter is genuinely going to be different, perhaps that is the first test both sides should be willing to take.


(The writer is a retired banker and author. He can be reached at krs1957@hotmail.com. Views personal.)

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