Union Budget 2023 - Pre-Budget Expectations and Views

Indian markets have outperformed more in 2022 due to better inflation management and corporate earnings that helped in recovery from challenging times. As we're entering 2023 with the Union Budget announcement right around the corner, I'm positive that India is likely to have good growth due to a strong macro environment. Here are a few key expectations I have from the upcoming budget.

1) Tax norms and GST

The digital payments space and its ability to scale and grow quickly have emerged as a pandemic success story. This was aided by the government offering incentives and tax rebates. The FM can consider waiving GST and TDS for specific financial services offered by Business correspondents. These agents play a vital role in the rural credit ecosystem and have been at the forefront of the government's digital push. A waiver will ensure that the benefits of the digital push reach a larger section of the populace.?

Moreover, the waiver will bring down costs considerably and help in the growth of the broader sector. The budget should provide economic benefits in the forms of tax exemptions and subsidies to improve the economic viability of BCs.

The 18% GST on customer charges on small value cash remittance (Domestic money transfer) should be exempt since it is used by an underserved segment of the population like migrant labour.

2) ONDC and e-commerce

Initiatives like ONDC are democratising e-commerce in India and shaping the future of global ecommerce. In order to encourage ecommerce in rural India, the government can offer waivers on GST and TDS to the merchants and consumer especially in Rural India.

3) Enabling digital payments for Rural India

During the Covid-19 crisis, digital payments facilitated functioning of businesses, including small merchants, and helped in maintaining social distancing.

4) Increased focus on Aadhar Pay in Rural Areas (in line with UPI in urban areas):

Small merchants in rural areas face challenges in accepting digital payments due to low penetration of ATM-cum-debit cards and smartphones amongst customers. While AePS has grown exponentially in rural India due to simplified product offering (Aadhaar in place of Debit card/Smartphone and Biometric authentication) and presence of neighbourhood BC Agents.

We Believe BHIM Aadhaar Pay, riding on AePS railroad, is the right product for small merchants from a customer accessibility standpoint. BHIM Aadhaar Pay adoption is thus key, along with UPI and PoS for equitable growth of digital payments in rural India.

The Government recently approved an incentive scheme to promote RuPay Debit Cards, low-value BHIM-UPI transactions. It had a financial outlay of ? 2,600 crore.

5) A similar provision should be made to Rupay PPI cards/ PPI programs as well for low value BHIM-UPI Transactions.

Various stakeholders in the digital payments systems and the Reserve Bank of India (RBI) expressed concerns regarding potential adverse impact of the zero MDR regime on the growth of the digital payments ecosystem.The National Payments Corporation of India (NPCI) has asked for incentivisation of BHIM-UPI and RuPay Debit Card transactions to create a cost- effective value proposition for ecosystem stakeholders, increase merchant acceptance footprints and faster migration from cash payments to digital payments. Budgetary support on UPI should be extended to non-Banks like PPI Issuers. PPI programs should also be involved, especially ones pushing adoption in rural areas.

6) Digital Banking Units

The government’s focus on setting up 75 Digital Banking units in 75 districts should be continued this year. The involvement of existing fintech players and Corporate banking correspondents which are bank agnostic in driving digital banking units will help expand necessary universal banking services to the last mile and enable us to meet our goal of financial inclusion through rural empowerment.

7) Leverage the Aadhaar stack to drive financial inclusion in rural

We have witnessed significant growth in transactions in Bank accounts in rural areas enabled by Business Correspondents leveraging the Aadhaar stack. The Aadhaar stack should be further leveraged for more use cases.