Union Budget 2022 has achieved a fine balance between macro-growth and all-inclusive welfare through the establishment of a digital economy and a booming FinTech ecosystem. It includes several promising initiatives that will help aspiring entrepreneurs, FinTechs and the overall startup ecosystem to succeed.
Firstly, a vibrant digital economy necessitates robust digital infrastructure. The Finance Minister proposed data centres and Energy Storage Systems including dense charging infrastructure and grid-scale battery systems to be included in the harmonized list of infrastructure. This will help to make credit more readily available for digital infrastructure and clean energy storage.
The budget has also given a huge fillip to the digital payments industry. The decision to maintain financial support for the digital payment ecosystem from earlier years will encourage more people to use them. The government has also recognised that digital payments are user-friendly and cost-effective. This serves as a huge motivation. Making digital banking accessible to far and wide through the establishment of 75 digital banking facilities across 75 districts is fantastic and sums up the government’s futuristic outlook. It will help in adoption and augment financial inclusion. This also calls for increased collaboration between scheduled Banks and FinTechs. Connecting post offices to the banking system might be a game changer, resulting in a slew of new applications.
The government’s long term vision and emphasis on futuristic technology is further reiterated with the proposed launch of the Central Bank Digital Currency (CBDC) or Digital Rupee by RBI, which will begin in FY 2022-2023. This will make currency management more efficient and cost-effective, as well as provide a wider range of opportunities. However, the industry still awaits further clarity on CBDC.
A critical announcement which will make the business environment for startups even more welcoming, is the government’s announcement that existing tax benefits for startups would be extended for another year, until March 31, 2023. Besides, long-term capital gains resulting on the transfer of assets will be capped at 15%, will encourage long-term investments in startup equities. The government’s confidence on this sector is evident with proposals such as the allotment of Rs 283.5 crore for the Startup India Seed Fund Scheme in the budget. These steps will promote entrepreneurship and innovation through the creation of an enabling environment. It also reaffirms the government’s commitment to Atma Nirbhar Bharat.
India is next only to USA and China in terms of emerging as a unicorn hub. According to the NASSCOM-Zinnov report, roughly 42 unicorns were born in 2021, setting a new record for the number of unicorns born in a single year. In this context, the FM’s announcement on the formation of an expert panel that will advise appropriate measures to scale up the industry even further, is a positive step.
Talent is the biggest capital for any industry to grow and prosper. The government’s focus on enhancing FinTech education is a fantastic step forward aimed at the long run. The idea to establish world-class overseas universities and educational institutions at GIFT City to conduct courses in financial management, FinTech sciences, technology, engineering, and mathematics that are not subject to local legislation is a remarkable step forward. This will ensure a steady supply of quality resources to the startup and FinTech sector.
While the budget has placed a strong emphasis on encouraging startups and FinTechs, one of the most notable highlights has been the Finance Minister’s push for capital expenditure. The 35.4% increase in capital spending to Rs 7.5 lakh crore will have a multiplier effect on the economy, boosting growth and facilitating job creation.
I believe the Finance Minister has delivered a bold and growth-oriented budget. It will accelerate digitisation, infrastructural development, innovation and entrepreneurship. The Union Budget 2022 will be remembered for spurring economic growth and long-term sustainability.
(Avinash Godkhindi is the Managing Director and Chief Executive Officer of Zaggle. He is an international FinTech and payments leader with over a decade and half years of experience in 12 countries across 5 continents.)
(Disclaimer: These are the personal opinions of the author.)