What FinTech leaders expect ahead of Indian Union Budget 2023-24

By Puja Sharma

As we move closer to the date for Budget 2023, experts from the FinTech industry share their expectations,

“The MSME sector has potentially turned out to be a key catalyst for the Indian economy in recent years, considering India is home to over 63 million MSMEs contributing close to 30% of the country’s GDP. Reiterating such a significant figure, it has become imperative for the government and the Fintech syndicates to work in alignment with each other and make the sector more stronger, resilient, and developed in terms of mutual growth and profitability.” Gurjodhpal Singh, CEO, Tide India, the UK-based MSME-focused FinTech.

To achieve the vision of making India a USD 5 trillion economy while creating a new self-reliant nation, the government should introduce a much-needed policy framework mandating large corporates to include the MSME segment in their business models in some or the other way. This can be done by procuring a certain percentage of the priority sector’s business or aiding them with the current technological innovations and marketing tactics to bolster their business growth.

Furthermore, the slowdown we saw in the economy last year has caused significant pain to MSMEs due to high-interest rates in the lending landscape inhibiting their operational capabilities. Therefore, soft loans at minimal interest rates or any reduction in the SME lending rates will provide impetus to the sector’s steadfast growth. On the other hand, the rising interest rate would pose a risk to the micro, small and medium-sized enterprises (MSME) portfolio of lenders.

“Lastly, while keeping in mind that the whole world is undergoing massive digital transformation, India’s significant chunk of the MSME population that resides in tier 2, 3, and 4 cities lacks digital awareness and inclusion to a great extent. The government must introduce certain initiatives with a focus to train and coach the sector on the technological advancement and marketing front to spur digitisation across the country.” Singh added.

According to Deepak Kothari, Co-founder of ftcash, The Union Budget 2023-2024 has the opportunity to help provide the FinTech sector with the much-needed impetus. The key areas where government support will go a long way are-

• Liberalisation and Enhancement of Credit Lines from Banks- Currently fintechs collaborate with banks on a one-to-one basis. The provision of a government scheme that provides a sovereign guarantee by the government of such credit lines will help channelise and enhance access to funds for fintech and also allow targeting of certain sectors/segments/regions in a cost-efficient manner.
• Rationalisation of GST Input Credit Framework in Colending Arrangements- Fintechs today collaborate with other financial services players and invariably in such arrangements there’s a potential loss of Input Credit in the current GST framework. Ensuring that the input credit is fully provided for will go a long way in ensuring that revenue leakages are avoided and benefits can be consequently passed on to the end consumer
• Enhancement of Legal Framework for Wilful Defaulters- The legal resolution for defaulters today is mired in a lengthy process that is inefficient and clogs the legal system. A seamless, efficient, and transparent process that provides for a time-bound resolution of cases where EMIs go into default will ensure that the financial services industry is strengthened. For example, today if businesses don’t pay GST, there’s a freeze that happens on the accounts, a similar framework for Sec 138 cheque bounce cases will ensure that wilful default is minimised.

2022 has been a crucial year for the Web3 and crypto industries. Despite being a relatively new and untested market, the crypto industry has witnessed rapid growth in India with an increasing number of people showcasing interest to invest in the asset class. According to a report released by FICCI and EY in 2022, Web 3.0 and blockchain can add a staggering $1.1 trillion to India’s GDP by 2032.

In FY22, the government announced a 30% plus surcharge and cess as well as a 1% TDS deduction on the transfer of Virtual Digital Assets. While it is great to see the government take a step towards regulating VDAs, in the upcoming budget 2023,

“We urge the government to create a progressive regulatory framework and offer clarity on taxation by reducing TDS and Capital Gains Taxes and leveling them with other asset classes such as stocks and bonds. This will address the ongoing concerns and uncertainty about the industry by creating transparency and helping industry players protect users from any kind of black swan events like the FTX collapse. Clear governance and regulatory framework will enable more people to invest in VDAs and attain financial freedom. It will also encourage innovation to transform existing businesses through blockchain technology as well as build newer solutions for the industry to thrive further,” said Rahul Pagidipati, CEO, ZebPay, a cryptocurrency exchange, and wallet firm.