Today, India’s honorable Finance Minister (FinMin) Mrs.Nirmala Sitharaman presented one of the most technologically-advanced union budgets of the modern era, promising the 1.3 billion Indian citizens a booster economic growth in the coming months. From easing the business transactions online to favoring “minimum government and maximum governance” policies for all kinds of industries, FinMin’s budget was dotted with a strong inclination toward building a blockchain-based financial marketplace for all stakeholders, especially the cryptocurrency exchanges, and digital asset holders in the country.
Rooting for Newer Fintech Solutions such as CBDC Key to Sustain Growth-Phase of Indian Economy
The FinMin has proposed two important changes to the existing ecosystem of central bank digital currencies or CBDC.
- Instead of regulating and competing with bitcoins and other crypto assets, the Indian Government will introduce its own blockchain-based Rupee digital currency as per its 2022-23 CBDC development plan.
- India’s FinMin is introducing what we call ‘crypto tax’. All crypto-based digital assets would now come under the purview of the taxation system in India, attracting a 30 percent tax on all crypto transactions. Industry leaders knew this would happen where the Indian government would earn a hefty payout from taxing crypto assets.
We spoke to some of the Fintech leaders after the budget session today. This is what the industry leaders had to say about the CBDC and crypto tax developments.
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CBDC a Boon for Blockchain Adoption in India
Jay Hao, CEO of OKX.com, said, “If we look at the global scenario, central banks around the globe have already launched or are about to launch their digital currency. India is slightly lagging in the digital currency race mainly due to the regulatory hurdles and reluctance in accepting the growing popularity of digital assets/digital currency around the world. I hope the announcement made by Finance Minister regarding CBDC is implemented without any further delay as it will give a much-needed push to the blockchain industry in India.”
Jay added, “The taxation of profit from crypto assets at 30% may not receive equal appreciation from all the stakeholders. The higher taxes may discourage investors from choosing crypto as an investment avenue and delay the mass adoption of crypto assets in India.”
Abhay Aggarwal, Founder & CEO, Colexion, said, “Cryptocurrency seems to have caught the government’s attention after FM recognized the currency as virtual digital assets. However, the biggest eye-catching part is the government’s decision on crypto taxation. It is noteworthy to consider this move as a progressive step towards monitoring, authenticating, and regulating the crypto ecosystem in the country and bringing possible transformations.
The highlight of the Budget for me is that India will be launching its own digital currency by next year. It’s a historic move as people are finally clear that digital currency is here to stay and can make a rational choice while investing in cryptocurrency. I hope this catches on and banks, too, start getting involved with the crypto industry as well.”
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Booster Dose for Crypto Industry in India
Shivam Thakral, CEO of BuyUcoin, a homegrown cryptocurrency exchange said: “The crypto industry in India got its booster dose from the regulators which were pending for a long time. We are delighted to see some concrete discussion around crypto in the Union budget by the honorable Finance Minister. The most significant development is the 30% tax on the income from the transfer of digital assets, which clearly shows the government’s inclination towards legalizing crypto in India. The cost of acquisition of crypto assets to be allowed as a deduction is expected to drive mass adoption of crypto and boost investor confidence. The 30% tax structure was always there within the crypto ecosystem in India but a formal announcement by the finance minister will further strengthen its implementation. The 1% TDS is new for the industry and we will have to wait for finer details to gauge its effect on the crypto trading in India.”
Shivam added, “The crypto investors in India must be extremely satisfied with this announcement as they can now execute crypto trading without any fear. The positive move by the regulators will legalize the billions of dollars invested by Indians in crypto-assets and create a new tax revenue stream for the government.”
RBI has always been ambitious with its CBDC launch. The launch of CBDC by RBI will catalyze the growth of blockchain infrastructure in India and will encourage more entrepreneurs to join the blockchain revolution. If RBI allows the trading of CBDC on private exchanges, it will add a new dimension to public-private partnerships in India’s fintech space. The launch of RBI’s CBDC will prove to be a momentous occasion for the digital asset industry as it will create a government-approved market for the launch of new/existing digital assets.”
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Dilip Modi, Founder, Spice Money, said, “It is extremely heartening to see the digital economy and fintech technology-enabled development being a key focus area for Budget 2022-23. The government’s proposal of setting up 75 Digital Banking units in 75 districts of the country and providing online fund transfer between post office accounts and bank accounts will help in adding further tailwinds to expand necessary banking services to the last mile and enable us to take a step further towards our goal of financial inclusion through rural empowerment. The government’s continuous focus on the digital payments ecosystem has paved the way for digital adoption amongst the unbanked and underbanked population of the country especially post the outbreak of the pandemic. We are hoping to see much higher traction this year that will address the current challenges faced by the citizens and create a #AtmaNirbharBharat.
Additionally, Finance Minister Nirmala Sitharaman’s announcement on the allotment of funds through NABARD to finance start-ups for agriculture & rural enterprises along with the plans to launch delivery of hi-tech services for farmers including the use of Kisan Drones is a great move towards the development of the agritech sector as well as for supporting nano-preneurs.
We are hopeful that the government’s strong support and initiatives including the introduction of the digital rupee by RBI will help in accelerating the growth for the fintech sector and will create multiple avenues for the underserved parts of the country.”
Aarthi Ramakrishnan, Country Head – India and Middle East, Kristal.AI, said, “It is satisfying to see that the FM has presented a growth oriented budget – the 35% increase in capital expenditure will support growth and have a multiplier effect on the economy, besides generating employment which is long term positive for India. Besides supporting the India growth story, the focus on the digital economy and fintech-enabled businesses, was heartening, as Kristal.AI is at the front and center of this transformation. Also worth mentioning, are the launch of the Ease-of-Doing-Business 2.0 initiative and the setting up of a regulatory body to review and scale up investments from VCs and Private Equity Funds. This is significantly positive for businesses like ours. Moreover, Gift City becoming a focus to attract global investment is a recognition of the fact that Indians will be given access to global opportunities across the spectrum. Directionally, a very progressive budget.”
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Ranjan Kumar’s (Founder & CEO, Entropik Tech), said, “It’s encouraging to witness that India is becoming a technology-led economy and the Union Budget 2022-23 proves this further. We are glad that the budget plans focused on the growth of the Indian startups ecosystem and adoption of technology is promoted across sectors. Focus on sunrise sectors and supportive policies for AI, Geospatial Systems and Drones, Genomics and Pharmaceuticals, etc. can assist sustainable development at a larger scale. Budget investments in R&D to further technological breakthroughs will definitely accelerate the digital economy. Furthermore, tax holiday for another year would definitely help upcoming startups and provide a much-needed boost.”
Get ready to Embrace India’s Own Regulated Crypto-based Digital Currency
Bibin Babu, Co-founder, MetaSpace said, “It was certainly a growth budget, and the introduction of India’s own digital currency ensures the cryptocurrency industry’s future success. The tax provision of 30% was announced in the Union budget 2022 for digital assets. No expenditure deduction except the cost of acquisition. It’s a win-win situation! Now, retail investors should no longer worry about whether they can invest in cryptos.”
Mo Akram, Ideator, MetaSpace added, ‘”Union Budget 2022 confirms more crypto adoption on the way as it presents fine-tuned clarity on the crypto landscape. There will be a sensational boom for cryptocurrency as more emerging investor classes begin to recognize its potential of it, leading to more blockchain innovations. Yet another step towards positive crypto regulations and taxation clarity.”
Amit Singal, General Partner, Fluid Ventures added, “Startups have got a boost in this year’s Union Budget. Among the many incentives proposed in the Budget is the reduction of voluntary exit, where the government has allowed the closure of a private limited company in 6 months of non-functioning. This will not only help accelerate and provide relief to startups wanting to shut a business but encourage them to experiment. Earlier they had to run the company for 18 months, even after closure, to avail of the benefit of the Fast Exit facility.
The surcharge on Long Term Capital Gain (LTCG) has been capped to 15%, which is again a good move to bring more HNIs into startup Angel investment.”
Ashish Nayyar, Co-Head of India, OakNorth said, “Budget 2022 sets an ambitious blueprint for steering us towards India@100. We particularly welcome the strong push to develop the country’s infrastructure through the PM Gati Shakti National Master Plan which will be a game-changer not just in spurring economic activity but also for human capital development and employment generation in some of the most critical sectors of the economy.We believe the Budget provides for continued policy thrust on enhancing the digital payment ecosystem is a clear positive for the FinTech sector. Specifically, the introduction of the Digital Rupee based on blockchain by the RBI will be an interesting catalyst in powering Digital India 2.0.”
Ashish added, “The extension and enhanced allocation towards the Emergency Credit Line Guarantee Scheme (ECLGS) till March 2023 will provide much-needed relief to the MSME sector which are a core engine for employment generation and economic growth. Budget 2022 also proposes to extend the existing tax benefits for startups by 1 more year – a promising and welcome move that will support the startup ecosystem in the country. We also welcome the government’s funding support to sunrise sectors such as climate action, deep tech, digital economy and AgriTech. We also welcome the strong focus on skill development by aligning the National Skill Qualification Framework with dynamic industry needs and promoting skilling programs in partnership with the industry to promote upskilling and employability. This is an important but often overlooked area, which is critical in ensuring the upward economic mobility of the masses.”
Saurabh Soni, Co-founder, Digisparsh said “I welcome the Government’s decision to set up 75 banking units in 75 districts. This is a strong move to penetrate digital financial services in our rural market which has 40 cr+ Jan Dhan customers. This will not just help to bring the unbanked population under the financial ecosystem but also enable them to receive timely financial aid to fulfill their education, business and health needs. Especially post-pandemic when out-of-pocket expenses to meet medical emergencies have shot up drastically, forcing people to resort to unorganized debt markets consisting of loan sharks. So while more details are awaited, I hope this also paves way for PPP (Private Public Partnerships) to emerge and provide specialized, low cost, targeted financial services, because rural banking needs are starkly different from urban needs.”
He further added, “at Digisparsh, we are at the conjunction of health, technology and finance. We work with consumers to provide 0% interest loans to meet their healthcare needs and help hospitals across the country to meet their working capital requirements. We are keen to work with banking institutions, government and healthcare ecosystem to ensure no one is deprived of financial support when their loved ones are ailing.”
Gurjodhpal Singh, CEO, Tide (IN), a UK-based fintech offering business banking solutions keenly noted the change in the government’s stance that now focuses on the government’s push to digital payments ecosystems and platforms and its implications using CBDC platforms.
Singh said, “The financial support for the digital payments ecosystem is a welcome move and further reaffirms the Government of India’s digital banking push. This push on digitization will make way for more inclusion in the ecosystem. The focus on ‘Ease-of-doing-business’ is a great step, as it will further promote entrepreneurship in the economy. Fintechs will continue to play the role that we have been playing for the past couple of years now, and these policies will further strengthen our role in the ecosystem. Moreover, the decision to interlink MSME portals and added corpus is the much-needed support at this hour.”
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Lalit Mehta, Co-founder & CEO, Decimal Technologies, said. “The focus on fintech and technology-enabled development right at the outset of the budget speech set an encouraging tone for the industry and the overarching vision of an all-inclusive digital economy.”
Lalit added, “Starting with the paperless budget, the common thread throughout the Finance Minister’s speech was the focus on promoting digital and technological innovations across sectors, which will spell accelerated growth for technology-led development, energy transition, and climate action, while ensuring an inclusive welfare society. It is heartening to see a sustained push towards making the benefits of digital banking reach every corner of our country with an initiative that marks the 75th year of independence by establishing 75 digital banking units across 75 districts. Core banking across 100 percent of the 1.5 lakh post offices by 2022, financial support for digital payments ecosystem, and a 6,000 crore rupees program to rate MSMEs to be rolled out over 5 years are some much-needed steps in this direction.”
Baba N. Kalyani, CMD Bharat Forge Ltd. said, “I would like to congratulate the Hon’ble FM for a growth propelling budget with significant thrust on enhancing competitiveness, infrastructure development, holistic digital drive and promoting financial inclusion. The proposed New legislation for SEZs with states as partners coupled with a heightened emphasis on the seven engines under PM Gati Shakti initiative should pave way for a New India that is recognized for its Speed, Productivity and Scale; thus, boosting the country’s overall investment attractiveness and export competitiveness. Aligned with the Hon’ble Prime Minister’s AatmaNirbhar Bharat agenda, the Government’s commitment to promoting self-reliance and indigenization by leveraging Indian Industry is once again reinforced with the 68% (enhanced) domestic allocation for defense capital procurement. Earmarking 25% of Defence’s R&D budget for Industry, Start-ups & Academia is a forward-looking measure that will pave way for investments in frontier technologies and capability development. Industry in partnership with DRDO through SPV mode for the development of critical weapon systems and military platforms is a path-breaking reform that will significantly transform the Indian defense eco-system and lead India to be a net-exporter of defense equipment/platforms.”
Baba added, “I should particularly laud the thrust given to new-age technologies and wider adoption of digital platforms in Healthcare, Education, FinTech, Agriculture among others. Exclusive policy on Battery swapping, special mobility zones and incentivizing clean technologies ( CleanTech) in public transport should lead to accelerated adoption of Electric Vehicles across the country. The increased outlay towards manufacturing of High Efficiency modules for Solar Power and strong emphasis on Circular Economy transition reinforces India’s commitment to Global Climate Action and Sustainable Technologies.”
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Avinash Godkhindi, MD and CEO, Zaggle concluded the discussion. Avinash said, “The honorable FM has presented a balanced budget with a strong push for digitalization, financial technology, and digital payments specifically. As one of the very few profitable SaaS Fintech players, we believe the biggest news is the issuance of the digital currency by RBI which will open a wide range of options and opportunities. Additionally, the endorsement that digital payments are user friendly and economical is a big boost to the morale of FinTechs and all digital payments ecosystem players, the continued support is most welcome. The aim to take digital banking to every citizen is an extremely heartening, positive, and bold statement. The plan to create 75 digital banking units in 75 districts is great.
Possibly the best way to execute this would be for scheduled banks to partner with FinTechs to roll out these effects. The Union Budget 2022 has various encouraging initiatives that will propel aspiring entrepreneurs and boost Fintech and startups. To further ease the business environment for startups, the government has announced the existing tax benefits for startups to be extended by one more year up to 31st March 2023. Overall the FM has presented a growth-oriented budget focusing on capital expenditure that will go a long way in providing the much-needed support for India’s long-term growth story and help create employment opportunities for the wider section of the society.”
Thank you everyone for sharing your insights with our Fintech audience!
[To share your insights with us, please write to sghosh@martechseries.com]
