The budget has also given a big boost to the digital payments industry.
The Union Budget 2022 has struck a fine balance between macro-growth and all-inclusive well-being through establishment of a digital economy and a rapidly growing fintech ecosystem. It includes several promising initiatives that will help aspiring entrepreneurs, fintechs and the overall startup ecosystem to succeed.
First, a vibrant digital economy requires strong digital infrastructure. The Finance Minister proposed data centers and energy storage systems, including intensive charging infrastructure and grid-scale battery systems, to be included in the harmonized list of infrastructure. This will help in making credit more easily available for digital infrastructure and clean energy storage.
The budget has also given a big boost to the digital payments industry. The decision to retain financial support for the digital payments ecosystem from earlier years would encourage more people to use them. The government has also recognized that digital payments are user-friendly and cost-effective. It serves as a great inspiration. Making digital banking far and wide accessible through setting up of 75 digital banking facilities in 75 districts is spectacular and reflects the futuristic vision of the government. This will help in increasing adoption and financial inclusion. It also seeks to enhance cooperation between scheduled banks and fintechs. Connecting post offices to the banking system can be a game changer, resulting in a slew of new applications.
The government’s long-term vision and emphasis on futuristic technology has been reiterated by the RBI with the proposed launch of a central bank digital currency (CBDC) or digital rupee, which will start in the fiscal year 2022-2023. This will make currency management more efficient and cost-effective as well as provide a wider range of opportunities. However, the industry is still waiting for further clarity on CBDCs.
An important announcement that will make the business environment for startups even more welcoming is the government’s announcement that the existing tax benefits for startups will be extended for one more year till March 31, 2023. In addition, assets resulting from the transfer of long-term capital gains will be capped at 15%, encouraging long-term investments in startup equity. The government’s confidence in this sector is evident from proposals like allocation of Rs 283.5 crore for the Startup India Seed Fund scheme in the budget. These steps will promote entrepreneurship and innovation through creation of an enabling environment. It also reaffirms the commitment of the government Atma Nirbhar Bharti,
India is second only to the US and China in terms of emerging as a unicorn hub. According to the NASSCOM-Zinnov report, around 42 unicorns were born in 2021, setting a new record for the number of unicorns born in a single year. In this context, the Finance Minister’s announcement on setting up of an expert panel which will advise appropriate measures to further boost the industry is a positive step.
Talent is the biggest asset for any industry to grow and prosper. The government’s focus on enhancing fintech education is a great move with a long-term objective. The idea of setting up world-class foreign universities and educational institutions in GIFT City to offer courses in financial management, fintech science, technology, engineering and mathematics that are not subject to local legislation is a notable move. This will ensure continuous supply of quality resources to the startups and fintech sector.
While the budget emphasizes on encouraging startups and fintechs, one of the most notable highlights has been the finance minister’s push for capital expenditure. A 35.4% increase in capital expenditure to Rs 7.5 lakh crore will have a multiplier effect on the economy, spur growth and facilitate job creation.
I believe the Finance Minister has given a bold and development oriented budget. It will accelerate digitisation, infrastructure development, innovation and entrepreneurship. Union Budget 2022 will be remembered for economic growth and long-term stability.
(Avinash Godkhindi is the Managing Director and CEO of Zagal. He is an international fintech and payments leader with over a decade and a half of experience in 12 countries across 5 continents.)
(Disclaimer: These are the personal views of the author.)
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