Budget 2023: Fintech industry seeks RRR–Relief, Reform, and Regulatory easing
One of the most important demands the businesses have from the government for the next Budget is to further ease the financial burden for startups in the fintech industry.
The Indian economy has shown great resilience as it continues on the path to becoming the fastest-growing G20 economy, despite the decelerating global conditions. The upcoming Union Budget will be crucial in strengthening and securing the Indian economy from the slowdown being experienced by other countries. It will play a pivotal role in determining the roadmap for India’s growth momentum and defining the recovery, especially when most of the world is staring at a recession.
From corporates to the common man, everyone is hoping for relief and reforms in the upcoming budget. The fintech and startup space in particular is looking forward to certain regulations and policy incentives in the upcoming budget that will boost the startup ecosystem, increase the availability of capital, and help companies navigate the predicted recession.
Liberalized tax framework: The industry requires some tax relief, especially under Corporate Income Tax and the rate of Goods and Services Tax (GST), which at present is 18%. Following the pandemic, the reduction in rates under Income tax has become the need of the hour. An unaddressed issue that needs to be discussed is the broadening of the tax base. Moreover, generalised reductions in startup taxes with no GST until annual revenue of Rs 10 crore will assist SMEs in strengthening the economy.
Easing financing burden for startups: One of the most important demands the businesses have from the government for the next Budget is to further ease the financial burden for startups in the fintech industry. As another measure of tax relief, the industry also wants depreciation on the fixed assets used by fintech companies. The government should extend support to NBFCs and fintech companies, working on their product in Tier II and Tier III cities, with adequate co-lending limits, and rates to develop the fintech industry and become fully digitalised.
Enabling regulatory environment: The fintech industry operates in a highly regulated space, and any regulatory changes can significantly impact the industry. The government should provide clarity on existing regulations, streamline the process for obtaining licenses and approvals, and reduce the compliance burden for fintech firms. We believe this could help SMEs build a stronger economy and increase jobs.
Access to global market: There needs to be more focus on including measures to make it easier for fintech companies to access global markets. This could include steps to eliminate barriers to entry and competing in international markets easier for fintech. India’s export is declining overall and this needs to be pushed by providing better supply chain financing options to exporters. We expect the government to provide financial benefits to exporters to use the ITFS platform for financing to give exporters financial benefits and also an impetus to the GIFT city initiative.
Digitise B2B Payments: Last year saw many regulatory disruptions for fintech players, leading to lesser funding and business uncertainties for fintech. We hope to see more policy certainty and a level playing field with banks and NBFC for fintech. India has seen huge progress in B2C payments but B2B payments are still archaic and need an overhaul. The budget should provide avenues to push digital B2B payments which can be faster and simpler with UPI integration
Technological advancements and investments: The government of India should be investing more in the technological areas of both, manufacturing and services, in the upcoming decades. This includes investing in AI/ML, blockchain in services and chips, defense equipment, biotechnology, clean energy technologies, etc. that will help India not only gain from the tailwinds, but also make the country self-sufficient to survive and thrive through some of the most important changes coming up in the next few decades. Apart from these, it will become very important for the government to allow for a more creative regulatory environment to be able to realize the full promise of these technologies in a safer manner since a lot of the implications of these technologies are still not fully developed or understood, and adding a lot of constraints early on will let go off the competitive edge.
Over the last few years, the fintech industry has witnessed fast-track growth and expansion and it is expected to continue to do so in the future. The sector needs more budgetary assistance not only to sustain the existing pace of growth but also to accelerate it.
To facilitate furthering financial inclusion, the industry needs some focus on rolling out measures to boost the liquidity flow to fintech and certain initiatives that would strengthen the existing digital infrastructure and promote financial inclusion.
Manish Kumar is the Founder & CEO of KredX
Edited by Megha Reddy
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)