Avinash Godkhindi

MD and CEO, Zaggle

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Budget 2022 Impact On Startups: ‘Amrit Kaal’ For Fintechs

The capping of surcharge on long term capital gains arising on transfer of any type of assets at 15% will promote long term investments in equity of startups.

Union Budget 2022 will be remembered as a watershed moment for the Indian Fintech industry. Not only did it once again reiterate the government’s commitment to a digital India but it has laid out a strong framework for startups especially Fintechs to flourish over the next 25 years. It presents a carefully crafted roadmap that has touched upon several aspects of the Fintech ecosystem, all envisaged towards taking the industry to greater heights. Here are some of the key takeaways in terms of Budget 2022 impact on startups. 

Push for digital banking: The endorsement from the government that digital payments are user friendly and economical is a big boost to the morale of Fintechs and the digital payments ecosystem players. The continued support from the policymakers is most welcome. The decision to continue with the financial support for the digital payment ecosystem from the previous years will spur the adoption of digital payments. One of the important announcements is the government’s vision of making digital banking accessible to every citizen. The plan to create 75 digital banking units in 75 districts is great. This will promote digital payments and further will boost financial inclusion. Possibly the best way to execute this would be for scheduled banks to partner with Fintechs to roll out these effectively. Post offices getting connected to the banking system could also emerge as a possible game-changer and it could lead to multiple applications arising out of it. 

Boosting entrepreneurship and tax benefits: The Union Budget has various encouraging initiatives that will propel aspiring entrepreneurs and boost Fintech and startups. To further ease the business environment for startups, the government has announced the existing tax benefits for startups to be extended by one more year up to 31st March 2023. 

The capping of surcharge on long term capital gains arising on transfer of any type of assets at 15% will promote long term investments in equity of startups. This is a further boost to the startup community and reaffirms the Government commitment to Atma Nirbhar Bharat.

Investing in futuristic technology: Yet another bold move by the government and futuristic as well, is the announcement of Central Bank Digital Currency (CBDC) or Digital Rupee by RBI starting FY 2022-2023. The government has yet again made a visionary decision by investing in a futuristic technology i.e., blockchain. This will make currency management more efficient and cheaper and also open a wide range of options and opportunities. However, more clarity is needed with respect to the CBDC.

Focus on digital infrastructure: Sound digital infrastructure is crucial for a strong digital economy. The FM proposed data centres and Energy Storage Systems including dense charging infrastructure and grid-scale battery systems will be included in the harmonized list of infrastructure. This will go a long way to facilitate credit availability for digital infrastructure as well as clean energy storage.

Laying the foundation – setting up Expert Committee and GIFT City: 

India is next only to USA and China in terms of emerging as a unicorn hub. The year 2021 has seen nearly 42 unicorns, the record new unicorns in a year as per the NASSCOM-Zinnov report. Venture Capital and Private equity have invested more than Rs. 5.5 lakh crore last year thus facilitating the startup ecosystem. To ensure scaling up the entire ecosystem, examining regulatory and other frictions the FM has proposed to set up an expert committee that will suggest appropriate measures. This is a move in the right direction as it will pave the way for the long term growth of startups and investments in the sector.  

Talent is the prerequisite for any industry to grow and prosper. Therefore the government’s focus on enhancing education is a wonderful step looking at the future. The proposal to set up world-class foreign universities and educational institutions at GIFT City to conduct courses in financial management, Fintech sciences, technology, engineering and mathematics free from domestic regulation is a great move. This will ensure a steady flow of best-in-class talent flow into the startup and Fintech industry. I am confident that these institutions will soon emerge as the epicentre of outstanding professionals and entrepreneurs, the future torchbearers of the country’s Fintech industry.

Budget focused on long term sustainable growth - Capex pushes to create a multiplier effect on the economy: While the budget has laid great emphasis on boosting the startups and Fintechs, one of the significant highlights has been the FMs push towards capital expenditure. The hike in capital spending by 35.4% to Rs. 7.5 lakh crore will lead to a multiplier effect on the economy, it will propel growth and facilitate job creation. ‘PM Gati Shakti’ plan will propel sectors like cement, steel and construction. The steps undertaken for EV penetration in public transport, allocation of Rs. 48000 Crores towards PM Awas Yojna, along with the extension of ECLGS for MSMEs and revamped Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) will go a long way to boost EVs, housing and MSME sector respectively. 

Overall, I believe the Hon’ble Finance Minister has presented a bold and growth-oriented budget with a strong push for digitalization, financial technology and a focus on reducing carbon intensity. The government’s focus on capital expenditure will help in driving economic growth and create employment opportunities across sectors and thus pave the way for long term sustainable growth for India for years to come.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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