While the United Progressive Alliance (UPA) government is supportive of promoting trade in local currencies within the BRICS group, bilaterally it is having second thoughts about introduction of the Chinese bank card — UnionPay — for financial transactions in India. The reason for this, sources say, is the huge bilateral trade imbalance between the two countries as well as emerging security issues.
Leaders from Brazil, Russia, India, China and South Africa will meet in Delhi for a two-day summit on March 28-29 for discussing issues related to global security, stability and economic cooperation.
Government sources said the BRICS leadership is expected to move forward on an agreement that allows trade in local currencies, as was agreed in principle during the last summit at Sanya, China, on April 14, 2011. As all the BRICS partners trade in hard currency, it was mooted that participating nations should consider signing bilateral agreements to trade in local currencies.
However, New Delhi is not sure about allowing the entry of the UnionPay credit card, which China says would allow more tourists from the country to visit India. For the last six months, Beijing has been urging India through diplomatic channels to allow the entry of UnionPay, which is a state-owned financial services company unlike the privately held Master or Visa card.
While the proposal is still being examined by various stakeholders on Raisina Hill, including the home ministry, the government is apprehensive regarding security of the data generated by Indian users, considering that UnionPay is backed by the People’s Bank of China.
It also fears that the move could lead to further widening of the trade imbalance between the two countries, which now stands at $27 billion.
With the boundary dispute still not being addressed seriously by Beijing, New Delhi is unsure how the card would play out in Arunachal Pradesh — which China considers South Tibet — even though North Block understands that mere card usage would not lead to assertion of sovereignty.