Top 5 FinTech takeaways from India’s Union Budget 2021
By Edil Corneille
India is getting back to its feet from the effects of the COVID-19 pandemic and Budget 2021 was obviously pegged to be a crucial factor for the economic revival at every level. Expectations from the Union Budget 2021 were very high because of the set back that the country faced due to the COVID-19 pandemic. A majority of the sectors had economically suffered resulting in the overall economy shifting its focus on survival rather than growth.
Avinash Godkhindi, MD and CEO of Zaggle told IBS Intelligence, “Union Budget 2021 is a step in the right direction. Clear focus is on the growth and the allocation of funds for infrastructure and Healthcare sectors is much needed and very timely for India. Governments support to develop a FinTech HUB at the GIFT city shows a clear focus to make India the centre of the FinTech universe and granting of Rs.1500 Crores to grow the digital payments space is again a very positive indicator to drive innovation and the entire FinTech industry will benefit from it. The proposal to hike FDI in the insurance sector up to 74% is a big boost to the BFSI sector and LIC IPO to be completed by 2022 and privatisation on 2 PSU banks and an insurance company is a step in the right direction.”
With a clear focus on ‘AatmaNirbhar Bharat’ which translates to a self-reliant India, the Union Budget 2021-22 was announced in the parliament with plenty of measures to boost and help the economy sustain the growth witnessed. The top 5 takeaways from the Budget for the financial technology sector have been mentioned below.
1. AatmaNirbhar Bharat
The Budget announced policy measures which encompass the vision of AatmaNirbhar Bharat, a self-reliant nation. The emphasis on banking and insurance among other sectors of healthcare, infrastructure, textile and agriculture will not only aid the sustenance of the economic revival but also unfold maximum growth. More than 262,000 jobs are likely to be created up to March 2021.
2. Setting up a FinTech Hub in GIFT City
The announcement of setting up a FinTech hub in Gujarat International Finance Tec (GIFT) City reflects on the focus of the government to make India the centre of the FinTech universe. GIFT City is said to be India’s first operational smart city and international financial services centre. The FinTech Hub will help create around 150,000 jobs for the youth and accelerate the use of artificial intelligence, machine learning, etc., in governance and drive tech-enabled tax functioning which will illuminate the increased importance of digitisation.
3. Allocation of INR 15 billion to support and boost digital payments
Digital payments have been instrumental and the growth over the past few years have skyrocketed especially during the COVID-19 pandemic. Hence, the government’s move to spend up to INR 15 billion in the coming year to incentivise the adoption of digital payments in India is expected to further help in digitising the economy. This will not only drive innovation but will make the e-payments mode easily accessible across the country especially in the Tier II and Tier III cities and will boost digital infrastructure and a cashless economy.
4. Doubled fund allocation for MSMEs
INR 157 billion has been allocated for the Ministry of Micro, Small and Medium Enterprises (MSME) sector. The announcements of incorporating one-man companies with no restriction in paid-up capital and turnover, increase in the MSME budget and an update in the definition of small companies under Companies Act, 2013 will manifest to be advantageous and valuable for Indian MSMEs and start-ups. This seems to be good news for FinTech companies that are start-ups. The MSME sector was brutally affected by the pandemic and this move has brought in a much-needed respite for the sector.
5. Government to set up ‘bad bank’
The government has proposed to recapitalise public sector banks (PSBs) to the tune of INR 200 billion and set up a bad bank to remove non-performing assets (NPAs). The setting up of an asset management company and asset reconstruction company will take up the bad loans on the books of the banking sector and address rising non-performing assets (NPAs). This move is again a welcome step as it will help to improve the health of the banking sector.
Budget 2021 seems to assure that the economy will continue to prosper despite the challenges. Recognising FinTech as an industry would have been much sweeter but overall, it looks like a 360-degree growth for financial technology companies.
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