Budget 2023 Fintech companies’ expectations from the Modi government
Budget 2023: The fintech sector has been a front runner for the growth of India’s financial industry. Currently, India, which is among the world’s fastest growing fintech markets, has approximately 6,600 Fintech startups with consumers who are increasingly becoming financially savvy with the use of technology and often purchase financial products through apps and online portals.
The sector has rightly been portrayed as an important component in supporting the Indian government’s financial inclusion and digital India efforts, and a bridge to achieving the $5 trillion economy target by 2025.
With the upcoming Union Budget 2023-24, the timing has been ideal for the government to introduce relevant policy measures to boost the Indian Fintech sector. As the nation prepares for the Union Budget 2023, let’s take a look at what Fintech companies expect for the financial and banking ecosystem.
Deepak Aggarwal, Co-Founder, Co-CEO, Moneyboxx
With 65% of the population living in rural India and largely dependent on agriculture and allied sectors, rapid and sustainable growth in the sector has long-term implications for inclusive growth. While policy initiatives like Priority Sector Lending Targets, Jan-Dhan Accounts, Mudra Yojana have led to improved access to credit over the years, further impetus is needed given that rural India received only 9% share of bank credit despite contributing almost half of the country’s national income.
New-age Fintech players are expected to play a pivotal role alongside banks in expanding financial inclusion and facilitating the availability of credit. In the upcoming budget, policies focused on addressing this structural credit gap and measures to increase rural incomes will be welcome.
Rohit Arora, CEO and Co-Founder, Biz2Credit and Biz2X-
In the upcoming budget, it is pertinent for the government to send out a clear message to attract FDI in manufacturing as well as in the infrastructure segment. India has great opportunities to play in the China Plus One policy, the business strategy aimed at encouraging firms and companies to expand their operations outside China. India needs to act quickly to help such businesses set up operations in India, as countries like Vietnam are quickly taking a large chunk of businesses away.
In the financial sector, given that MSMEs contribute around 29 percent to India’s GDP and employ a significant number of people, it is imperative for the government to roll out reforms, including introducing a clear roadmap around the establishment of standalone digital banks. These banks can play a major role in increasing credit access to MSMEs as well as to other larger enterprises. Such reforms will also help to attract long-term FDI and create many jobs in the process.
India has already proven its mettle in the fintech space over the past few years and such favorable reforms will further give the fintech sector the ‘big push’. India has a veritable competitive edge in this sector and now it needs to build more scale to show its strength to the world.
Gaurav Jalan, Founder and CEO, mPokket
The constant innovative reforms and technological advancements have given an impetus to the growth of the FinTech industry in India. With the annual budget just around the corner, it is expected that the government will prioritize the needs of the FinTech players and implement policies to add to their growth trajectory.
It can be expected that the government will bring in reforms to strengthen the partnerships between FinTech institutions and banks. We expect the Minister of Finance to take into account the financial burden on start-ups and propose guidelines to ease it. In the last budget, she gave big tax breaks to start-ups and employees, to boost their development and to solve the problem of double taxation and the tax burden that employee stock ownership plans (ESOPs) have on employees. However, the eligibility criteria were too strict, and as a result very few start-ups could benefit from them. So we can expect the government to look into this and give tax breaks to budding FinTech startups and their employees.
India’s journey towards financial inclusion is paved by exceptional financial solutions provided by FinTech companies. The work we do to make financial services accessible to everyone is a major positive result of digitalisation. FinTech will continue to grow at a faster rate and penetrate deeper into the country only if rural areas have a strong digitization network.
This sector expects more assistance from the government to develop strong partnerships with banks and financial institutions to promote better financial inclusion, both offline and online. The upcoming budget should also consider and offer tax benefits on the total expenditure of FinTech startups, perhaps in the form of a small GST subsidy.
Since personal loans now make up the bulk of the loan market, the effort to offer some form of tax refund to people who take out personal and education loans, similar to what those who take out mortgages receive, will also be appreciated by people who take out such loans.
Ankur Nijhawan, Managing Director, AXA France Vie—India Reinsurance Branch
We expect that the upcoming budget will focus on policies to promote economic growth and resistance to the pandemic. Given the recent hikes in health insurance premiums and the need to provide basic financial protection against natural calamities like Joshimath, the insurance industry expects a combined tax break of up to Rs1 lakh for health and home insurance.
The industry is also hoping the finance minister will bring these basic protection schemes below the zero GST mark or tax it in the 5% bracket at most. While expanding the financial safety net, such a move will also increase insurance penetration in India. Relaxing norms and providing help in the form of tax benefits could go a long way in opening up the segment for the currently underserved and unserved sections of the population.
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