– By Richa Roy, Partner, Cyril Amarchand Mangaldas
The Budget comes at a time of what has been called “poly crises” in geopolitics and economics and the climate. And yet the World Economic Outlook released by the IMF the day before the Budget called India a bright spot growing at over 6 per cent. So, the Budget is cognizant of both the challenges and opportunities this presents. It is fiscally prudent yet invests in drivers of growth – such as core infrastructure and sunrise industries such as data and AI and robotics.
Focussing on transitions necessitated by climate change and achieving Net Zero could add $371 billion (approximately Rs 29 lakh crore) and 4 percentage points to India’s GDP, creating 12 million new jobs and significant saving of expenditure by 2030 according to a report by the Asia Society Policy Institute which relies on modelling prescribed by Cambridge Econometrics. In recognition of this, green growth was an important theme of the Finance Minister’s Budget Speech – including allocations for energy transition, energy storage and a continued impetus on sectors such as green hydrogen. Acknowledging the need for behavioural shifts, a credit scheme to incentivise individuals and companies to adopt environmentally sustainable behaviours was announced – the details of which will be eagerly awaited.
In recognition of the central role of the financial sector, the Finance Minister included it as one of the seven pillars of the budget speech and announced some potentially transformative measures.
All financial sector regulators have been encouraged to undertake a review of the regulations. They have also been encouraged to include public consultation as part of their regulation making process. This will reduce regulatory frictions and burdens creating a deeper culture of compliance beyond ‘tick the box’. It buttresses the move towards trust-based regulation – recurring policy theme. This will also result in grounded market feedback loops and better quality, more responsive regulation – that is proactive rather than reactive – particularly given leap-frogging emerging technology. It will also improve the legitimacy, accountability and preserve the autonomy of the regulators. This is an opportunity for more evolved regulatory governance which is internationally competitive.
The legislative amendments to enhance bank governance will bolster confidence in the functioning of the financial sector. It is an opportunity to create a uniform levelled up playing field for all categories of bank, neutral of ownership.
Finally, the national financial information registry will have a multiplier effect in deepening financial inclusion – for credit and beyond. This coupled with other proposals on data governance could significantly improve the digital delivery of financial services.