Budget 2017-18: Forging a bright future for Fintech and Startups
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The
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Money at Your Fingertips
Aadhaar Pay is the merchant version of the Aadhaar Enabled Payment System. Merchants using Aadhaar Pay would be able to receive payments from customers just with their fingerprint. With this app, even people who do not have cards, mobiles or e-wallets would be able to make digital payments. This would boost financial inclusion and increase the tax base. Simpler payment practices will ease the effort currently involved in making transactions. Moreover, it would become easier for small businesses to apply for loans and for
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It was encouraging to see the rapid adoption of the
Building the Infrastructure
Without infrastructural support, no amount of incentives can cause change. In recognition of this, banks have been asked to launch 1 million new PoS (point-of-sale) terminals by March and 2 million Aadhaar-based PoS terminals by September. Apart from banks, post offices and fair price shops will be promoting cashless transactions, taking digital payments to the grassroots.
All duties have been waived for manufacturers of PoS devices, fingerprint readers, iris scanners and other biometric payment devices. Additionally, ₹10,000 crores have been allocated to Bharat Net, a project that is taking high-speed broadband to Gram Panchayats in India.
All these strategically-designed measures would strengthen the resilience of India’s digital economy. The ramp in digital payments would not only increase the tax base but would help small business secure more loans for their working capital needs. Fintech companies would have the needed information to approve loans even faster and offer a variety of financial products based on frequency and type of receipts.
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While encouraging digital transactions, Budget 2017-18 simultaneously discourages cash transactions. Transactions above ₹3 lakhs are no longer permitted to be made in cash.
The Finance Minister announced a reduction of presumptive tax for SMEs with the annual turnover of up to ₹2 crores, from 8% to 6%. However, this reduction is valid only for receipts by non-cash means.
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Moving Online
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The seriousness of the government to take everything online is quite evident, from the The government is targeting over ₹2,500 crore digital transactions for FY18 through BHIM Aadhaar Pay, IMPS and debit cards. The importance of the success of digitalization can be sensed by the tax figures released. Of 4.2 crore people in the organized sector, only 1.74 crores filed tax returns and of 13.94 lakh companies, only 5.97 lakh have filed returns.
These figures indicate how skewed the system currently is. The initiatives being proposed by the government will increase the tax base, the tax rate can be reduced without impacting government revenue. A further reduction in the tax rate would be beneficial for businesses and the economy; thus beginning a virtuous cycle of growth.
Most businesses struggle to survive, not because they can’t be profitable, but because they face severe cash-flow constraints for their daily operations. While these businesses struggle, traditional banks are reluctant to offer loans.
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Budget 2017-18 has tried to address this by doubling the lending target to ₹2.44 lakh crores. This is in addition to the increase in government credit guarantees for SMEs from ₹1 crore to ₹2 crores, as announced by PM ALSO READ: One Globe Forum can make India the epicenter of developmental dialogue
While these measures are welcomed, digitalization and the use of new-age technology are most critical to alleviating the problem. The RBI has already included lending
The provisions in the Union Budget 2017-18 appear startup and fintech friendly. An ever-increasing number of
This article was originally authored by Gaurav Hinduja. Co-founder and Managing Director, Capital Float
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