Budget 2018: In the aftermath of disruptive monetisation, where digital currency became a widespread phenomenon, and the Prime Minister’s focus on Digital India in the last year, it is clear that India stands on the horizon of a digital revolution.
Budget 2018: In the aftermath of disruptive monetisation, where digital currency became a widespread phenomenon, and the Prime Minister’s focus on Digital India in the last year, it is clear that India stands on the horizon of a digital revolution. Technology is poised to reshape the lives of citizens by providing a uniform, standardised and a ‘glocal’ format for administrative and governance processes, much on the lines of GST levied from last year. While the country rides on a spurt of growth trajectory, policy reforms will serve the purpose of a fuelling catalyst, wherein lies the role of Budget 2018. The upcoming Budget can play an important role to push to see reforms in the critical fields of digital innovation and its adoption by citizens and businesses. Start-ups are at the centre of innovation currently, where the right conditions allow companies to quickly scale up and operate as national properties in a short time-span. Start-ups often fill the gaps in the legacy industry ecosystem and provide flexible and easy-to-use products and services in an easily adoptable manner, built on the platform of technology. Recognising the same, the government might come up with a plan in this Budget to provide higher incentives for start-ups and fintech firms with a focus on creating a social impact or to push investment flow into start-ups, and there could be some incentives for companies providing venture debt or easing out of listing norms to provide easy exit for venture capital. This can widen the horizon, fuelling investor contributions, while simultaneously creating a larger flow of capital into the start-up ecosystem.
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An important aspect of a nation’s digital adoption lies within the behaviour of citizens themselves. The way forward for the government might be in not just incentivising the altered behaviour, but also in enhancing customer experience. The government should come up with reforms to make citizens more inclined to use digital tools like providing encouragement and incentives to use eKYC, eMandate and eSign for reduction in paperwork, leading to easy loan disbursals and collections. The government should also consider zero stamp duty for digitally-signed loan agreements and reduced GST on the processing fee of digitally-processed loans, which will further encourage citizens to go digital.
The adoption of digital in daily routine has been pushed along by demonetisation, where digital transactions in various forms exponentially grew in a short period of time. To sustain this behaviour change, the government should also consider uniformity of MDR rates of UPI, QR Code payments and debit card payments, as well as capping of interest rates charged on credit card, and reduction in credit card MDR to encourage use of credit cards to provide financial push for citizens towards use of digital currency.
With cryptocurrency being in the limelight in 2017, the government should have regulations in place for trading of crypto with strict guidelines as well as making investor education initiatives mandatory for such instruments. In the current situation, even retail investors with little knowledge of the underlying risk are jumping on to the bandwagon in the hope of immediate gains, but very soon it may cause heartburn due to online frauds and price crash in global markets.
Financing institutions play a key role in impacting growth of a country as they provide monetary support to smaller businesses, which create a larger, albeit more unorganised industry. The government might come up with incentives for banks, NBFCs, fintech firms to provide small-ticket daily loans digitally for small vendors, which would create a transparent, quick and seamless process to provide financial relief and support. On the policy front, the Micro Units Development and Refinance Agency scheme was designed to act as a supplementary financial institution for MSMEs. Based on GST data, the government might extend the same scheme to loans up to Rs 20 lakh (currently it’s Rs 10 lakh).
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The government should also consider setting up guidelines on sharing digitally-generated customer data within the more niche ecosystem of financial regulators like RBI, SEBI and IRDA; inter-institutional collaboration will lead to certain key benefits. Foremost amongst them would be reduction in customer acquisition costs, improving customer service, enhancing investment advisory, and reduction in frauds.
The government can consider policies that support digital transformation at the administrative level, by providing further capex on innovation and research initiatives for digital adoption, incentivising reskilling of manpower, digital and financial literacy initiatives, and incubation of start-ups in a manner similar to CSR and R&D initiatives. Incentive schemes can be provided for converging services for agriculture, smart cities, education, citizen services and financial services under one roof in smaller towns through the use of digital technology. There is immense potential with regards to innovation in financial services sector and the Budget holds a lot of promise for the sector. By adopting a multi-pronged strategy that simplifies processes, incentivises desired behaviour, and standardises formats by creating a unified database, the government can lead the adoption of digital in India to further success.