The trackpath for the digitisation marathon is just getting laid. We are here for the long haul. Let me begin by saying that India is a bright spot amidst the global economic downturn. The World Bank projects that the country will become the fastest-growing economy among the seven largest emerging market economies. Our real GDP is estimated at 7% even as the inflation rate has been reined in. At this juncture, a spending boost through Budget 2023 will be conducive to our growth story.
Financial incentives to Make in India can promote the manufacturing sector. This, in turn, can boost investments and increase exports. Policy reforms announced in the budget can expand business possibilities and generate new employment opportunities. These investments can strengthen the development of thriving industries such as fintech.
MSMEs are the soul of the Indian economy. A self-sufficient or Atmanirbhar Bharat can be truly achieved only when the country’s 63 million plus MSMEs have a conducive regulatory environment to engage in business activities. While the government has taken a series of steps to empower MSMEs including an economic relief package and prompt debt resolution, additional efforts to improve ease of doing business are welcome.
At the very outset, I believe that Budget 2023 can promote ease of doing business by a further simplification of the application process. This will mean that MSMEs can launch their business operations within a shorter duration. This can be supplemented with budgetary reforms such as an exclusive licensing regime for MSMEs, quicker registration, and credit support through low-interest or interest-free loans. Enabling the MSMEs to sell their products and services overseas and cross-border trade enablement can provide a further impetus to growth. To build a sustainable business ecosystem for MSMEs, the Union Budget 2023 can also introduce awareness campaigns and opportunities to collaborate as enablers for MSMEs. This can be supported by financial incentives and a seamless licensing process.
As a member of the fintech sector, I believe that there is a need to invest towards improving the digital delivery of financial solutions. The budget can aid this effort by encouraging partnerships between banks and fintech firms.
Collaboration platforms facilitated by the government to offer customised products will be beneficial for customers.
Fintech startups like us rely on our skilled workforce to take our business mission forward. Here, employee stock ownership plans (ESOPs) are a critical tool to attract talent. The current rules mandate tax payment at the time of exercise (purchase) of the ESOP option as well as when the shares are sold. Three years ago, the finance minister had permitted select startups to defer ESOP exercise taxes. I am hopeful that Budget 2023 will extend this benefit to all DPIIT-recognised startups.
Being nimble and agile, fintech startups have brought financial services to Indians’ doorsteps. What can add to the proliferation of our services is streamlining the existing licensing process. While all the regulations are in place, the implementation hiccups need to be ironed out. For instance, there can be budget initiatives with respect to building a consolidated licensing regime for fintech firms.
The attractiveness of India is here to stay. A testament to our success is the fact that foreign-domiciled companies are keen to shift base to India. Some have already begun the process. To enable a seamless move, enabling a single window clearance system can be helpful.
Lending a helping hand to the MSMEs is one of the pivotal reasons for our industry’s existence. I am of the opinion that budgetary support to fintech startups in the form of guarantee schemes will be beneficial to channelise credit flow.
In 2022, India minted 21 unicorns, of which three were fintech startups. The country has now become the world’s third-largest fintech market according to a PwC report. Built on India Stack and energised by the Unified Payments Interface, our fintech market has grown by leaps and bounds. At the current growth levels, this market is estimated to reach a $150 billion valuation by 2025.
A multitude of reforms helped reshape digital banking in 2022. Cardless payments were enabled by Credit Card-UPI linking. Tokenisation helped create unique token-based card storage and better security for digital payments. Digital lending rules were tweaked to ensure that customer privacy was safeguarded.
This year, the cabinet has approved a ₹2,600 crore scheme to incentivise low-value UPI transactions and promote RuPay debit cards. I am of the view that financial incentives are necessary to nudge customers and businesses to go digital. To this effect, sops for digital payments continue to be important.
The Niti Aayog has already made a case for introducing a new category of financial institutions called digital banks. Putting this proposal on fast gear through budgetary allocations can be an added booster to the digital economy.
Our fintech journey has just started. India’s demographic dividend has opened up unlimited opportunities for the fintech sector. With an industry size of more than 2,000 fintech entities, the scope to grow is aplenty.
The seal of approval from Finance Minister Nirmala Sitharaman will be a key motivator to expand our fintech offerings from the industry. The trackpath for the digitisation marathon is just getting laid. We are here for the long haul.
Shashank Kumar
Razorpay MD and co-founder