With the Union Budget 2024 right around the corner, leaders from across sectors are speculating and hoping what the impact will be. As it’s going to be an Interim Budget, the ruling government will present a plan for government expenses until the new government takes over instead.
Nonetheless, experts from various sectors expect big movements in the new Union Budget, especially in the fintech sector. The fintech market is one of the biggest growth drivers of the Indian economy, which is expected to report the highest growth among 13 large economies included in Goldman Sachs Research’s global outlook. So naturally, many are expecting the sector to witness a boost with the Interim Budget.
To know more about why the fintech sector may receive incentives and support in the Union Budget 2024-25, read on.
The following are some of the indicators of why the fintech sector may get generous allocations in the 2024-25 Budget presented by Nirmala Sitharaman:
In the previous budget, Nirmala Sitharaman eased regulatory norms to promote the use of Digilocker for documentation. The expansion of these services also proved to be a great boost for individuals and financial service providers.
It was also announced that the government will set up 100 labs in engineering institutes for developing apps for 5G services. This will help Indian fintech companies to explore new possibilities. With this support from the previous Budget, the sector is expecting the same from the upcoming one.
In the Union Budget of 2021 and 2022, the government extended financial support of ₹1,500 Crores to build digital payments infrastructure. Additionally, the volume of digital payments has witnessed a CAGR of 45% from the financial year 2017-18 till 2021-22. The volume of these transactions rose from 2,071 Crores in 2017-18 to 13,462 Crores in 2021-22.
Considering the growing number of UPI transactions, the financial outlay for the National Payments Corporation of India (NPCI) can also rise significantly.
DBT was introduced to prevent leakages in transferring benefits of various schemes. Under this, the transfer happens directly to the beneficiary’s Aadhaar-linked bank account, with no intermediary. Fintech plays a crucial role in this, its development in underserved and unserved areas can enable a wider reach. Hence, leaders of the sector are expecting this year’s Union Budget to equip fintech companies with the support required to promote their services in Tier 3 cities and rural areas.
The Indian fintech space has witnessed one of the most fast-paced growth in the world with more than half of the startups founded between 2016 and 2021 being fintech companies. So, the expectations from the budget are in line with the growth and how to further propel it. Ashish Goyal, Co-Founder and CFO of Fibe has shared his expectations from the upcoming Union Budget in this regard. “Empowering the entrepreneurial spirit is the cornerstone of economic growth and in the upcoming Budget, we anticipate strategic measures to foster a robust entrepreneur ecosystem. We expect the Government to remain a key catalyst in developing the startup ecosystem.”
Hinting at the regulatory reforms introduced last year, he said, “The Government has undertaken several security measures to ensure consumer protection while accessing finance online and we expect a regulatory framework to restrict illegal lending by unauthorised players to further strengthen the ecosystem. We hope that the Government continues to expand the digital infrastructure to support deep penetration of financial services which reduces the cost of delivery of services.”
“ONDC (Open Network for Digital Commerce) and OCEN (Open Credit Enablement Network) shall be supported to create incentives for investment in technology and R&D to ensure this. We also urge the Government to consider the implementation of a uniform KYC framework across all financial services that will not only enhance efficiency but also bolster financial inclusion. This measure aligns with our collective vision for a digitally empowered and financially inclusive India, driving economic growth and encouraging a responsible lending and borrowing ecosystem,” he added, on other measures that the government can announce in the Union Budget.
In previous Union Budgets, the government introduced certain regulatory frameworks to enable more innovative fintech services. Other measures were aimed at enhancing financial inclusion and better serving the underserved areas. In the latest Union Budget 2024, the government is likely to follow the same trend as the fintech industry is instrumental in enabling direct transfers and revolutionising digital payments.