Budget 2021: Roll out big-bang reforms and not just tinker with taxes, say fintech startups

India’s pandemic-hit economy needs big-bang reforms and not a mere tinkering of the tax structure to navigate its way out of its first recession in four decades, fintech entrepreneurs feel.

The government should also weigh measures to drive consumption and expand the reach of financial services by offering digital banking licences, suggested the founders of fintech startups Fisdom, Niyo, and CapitalFloat during a pre-Budget panel discussion organised by YourStory.

“A seriously big move that dramatically improves the purchasing power of consumers will have a greater impact on GDP (gross domestic product) numbers, than merely some tinkering on taxation,” said Subramanya SV, Co-founder and CEO at mutual fund investment app Fisdom.

“The focus of the budget should be to do things that will create a 12-15 percent GDP growth for next year. The government needs to look at measures that will boost overall growth across consumption and manufacturing,” Subramanya added.

This view was echoed by Shashank Rishyasringa, Co-founder of CapitalFloat, who said that the government should consider expanding its credit guarantee scheme and improve transmission for those looking to get their businesses back on track.

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Rishyasringa also wants the government to offer another fiscal stimulus. “Most of the financial sector that felt the liquidity crunch did not quite get the impact that they were meant to,” he said.

He said that the government should look at giving tax breaks for angel investors investing in new digital businesses coming out of the COVID-19 pandemic, and for companies making these strategic investments. This, he said, “will create an ecosystem of Indian capital to support Indian ideas.”

Subramanya also said the Indian economy presents an over-taxed value chain both on the income side as well as on the consumption side. “Taxation on assets and sale of assets and taxation on income both come under the purview of the budget and there should be some rationalisation over there,” he said.

Vinay Bagri, Co-founder and CEO at fintech app Niyo, said the fact that inflation is under control gives the central bank a good opportunity to further bring down borrowing costs.

“There is an opportunity to cut rates, reduce the reserve ratios and provide a lot of liquidity to the industry,” he said.

The RBI slashed its benchmark repo rate by 115 basis points last year after the pandemic hit India, but kept the interest rates unchanged in its most recent monetary policy review in December.

Bagri also said that the pandemic has landed India in a “unique position”. While the virus continues to rage on in Europe and “nobody trusts China anymore”, India has become an attractive investment destination.

The entrepreneurs also want the government to focus on taxation and banking reforms in this budget.

Rishyasringa said the country “needs to create new capital vehicles that have a playbook to chase growth,” and the only way this can be done is by creating new banks.

“You can’t expect banks to recapitalise and clean up on the one hand and grow at the same time,” he said, referring to the problem of non-performing assets plaguing India’s banking sector.

“One of the things which I’d love to see is a policy around doubling the number of banks in the country over the next five years. It could look at digital banking licences or upgrading a bunch of NBFCs (non-banking finance companies) into banks,” Rishyasringa said. “India could have 50-100 new banks…that have developed expertise in specific sectors that are growing and are proven.”

For YourStory's multimedia coverage of Budget 2021, visit YourStory's Budget 2021 page or budget.yourstory.com.