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FinTech, AI & Digital India: Budget 2018

It’s simply fascinating to read the budget document and observe where the money is earned and spent. This is my second year of reading the full document, and if you are like me and believe in observing macroeconomic decisions that lead to micro-impact, you should go through the full document. For the purpose of this piece, I will be restricting myself to FinTech and related industries. As I read the 2018’s budget speech, I could sense one consistent theme:

Technology as a driver of change

As a driver of efficiency.

Cash-flow-based lending: An interesting cocktail of linking Trade Electronic Receivable Discounting System (TReDS) platform with GSTN (and onboarding public sector banks and corporates on it). Online loan sanctioning facility for MSMEs to be revamped (assuming same will happen based on GSTN data) for prompt decision-making by the banks.

Lending FinTechs: The Government (rightfully) believes that the use of FinTech (access to alternative scoring data points) in the financing space will help the growth of MSMEs. A group (we are yet to see if they will choose the right partners from the industry or not) in the Ministry of Finance is examining the policy and institutional development measures needed for creating the right environment for FinTech companies to grow in India.

As a tool to identify & remove ghost recipients, and bring more businesses & individuals into the formal financial system.

Impact of Demo: In the 2016-17 financial year, 8.551 million new taxpayers filed their returns of income as against 6.626 million in the preceding year. By including all filers, as well as persons who did not file returns, but the paid tax by way of advance tax or TDS, we can derive the figure of Effective Taxpayer Base. This number of effective taxpayer base increased from 64.7 million at the beginning of FY 14-15 to 82.7 million at the end of FY 16-17.

Business UID: Every enterprise, major or small, needs a unique ID. The Government will evolve a scheme to assign every individual enterprise in India a unique ID. It will be interesting to see if it’s Udyog Aadhaar or something different.

As a driver of new opportunities (blockchain and AI as key focus).

The National Program on Artificial Intelligence by Niti Aayog aims to help establish India as a knowledge-led, digital society.

Crypto & Blockchain: The Government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system. Crypto fundamentally questions the existence of any central authority, so this reaction is not a surprise. However, my view is the government is still not stopping people from holding cryptocurrencies or investing in them. They are gung-ho about blockchain and would explore its use proactively for ushering in the digital economy.

FASTags for Toll Payments: The system of cash toll payments is being rapidly replaced with FASTag and other electronic payment systems to make road travel seamless. Number of FASTags has gone up from about 60,000 in December 2016 to more than 1 million now, which is still a poor figure considering the number of years of existence of FASTag. Underlying issues in FASTag are still not solved. From December 2017, all class ‘‘M’’ and ‘‘N’’ vehicles are being sold only with the FASTag. The Government will come out with a policy to introduce toll system on a ‘‘pay as you use’’ basis.

Creating an enabling environment for VC funds and angel investors. Recognizing their importance in the early stage of an organization while signals on taxation are still mixed.

As an enabler towards the targeted delivery of benefits (reducing the cost of corruption and delivery) to those who deserve them the most.

Prime Minister Jan Dhan Yojana will undertake measures to provide services of micro-insurance and unorganized sector pension schemes through all 600 million basic accounts that will come within its fold (essentially, all accounts opened till date under the basic category).

Extend the facility of Kisan Credit Cards to fisheries and animal husbandry farmers to help them meet their working capital needs.

Direct Benefit Transfer mechanism of India is the biggest such exercise in the world and is a global success story.

To conclude, I look at the above-mentioned interventions as promising drivers of Digital India and I believe the Government will ensure industry participation in FinTech-specific interventions.

Abhishant Pant

Abhishant is a Mumbai-based FinTech expert. On March 13, 2016, to enhance his understanding of the challenges and catalysts in India’s journey towards a cashless society, he started his cashless journey (essentially, he stopped carrying physical manifestation of money, i.e., cash) experiment. During more than 200 days of journey, he traveled the length and breadth of India and did a comparative study with the Singapore market as well. He has spoken about the learnings from his journey via Ted Talks, Lectures at NUS, IIM and IIT’s and at various banking conferences. He is closely associated with the FinTech world (as a mentor) via incubators like Barclays Rise, Zone Startups and writes regularly on the FinTech landscape’s opportunity and challenges.

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