Setting Off An Economic Multiplier With Fintech At its Core

The Budget 2022, with its focus on rapid, holistic and inclusive economic growth, has set in motion an economic multiplier. The Finance Minister has given a clear push to the rural sector and increased budgetary allocations for the MSME sector, while at the same time creating a conducive environment for the growth of startups in the country. These initiatives, cumulatively, will become the major drivers of improved livelihood in the country. 

At the core of all this is the fintech sector, which has the potential to act as the catalyst for this growth. Budget 2022 recognises the vital role that the fintech sector can play in moving the needle. Strengthening the core, allowing growth and compounding its impact is the three-pronged approach that would set in motion the multiplier effect as envisioned by the government. 

Robustifying Fintech  

The effectiveness of the fintech sector in any country is dependent on two major factors -- robustness of the digital infrastructure and availability of skilled professionals to drive innovation. By onboarding 100 per cent of India’s 1.5 lakh post offices onto the central banking system, the government has taken a major step in expanding the base of India’s digital infrastructure.  

Moreover, this budget has also made provision to establish 75 digital banks in the 75 districts of the country, making the digital banking infrastructure of the country stronger. With these two initiatives, the government has created an expanded space for fintech players to operate in and innovate. 

Trained minds are an absolute necessity for the fintech players to take full advantage of this expanded digital infrastructure. This budget not only has provisions to create a Desh Stack e-portal platform to enable learning new skills but also allows world-renowned institutions to set shop in Gift City to train Indian minds in financial management and fintech. These measures will equip India’s youth to explore opportunities in these sectors and has enabled the fintech sector to tap into the innovation pool in India. 

Enabling Faster Fintech Growth 

A robust fintech sector needs larger avenues to grow that can only be achieved when access to fintech services is widened, while at the same time expanding the base of fintech adoption. Although India has the highest fintech adoption rate at 87 per cent, this budget has enabled the sector to take it to a full 100 per cent. 

Firstly, by expanding its share in the sector beyond the National Payments Corporation of India (NPCI), the government has acknowledged its importance and has enabled its rapid growth. The government’s plan to introduce thematic funds for sunrise sectors like the digital economy is a very welcome step that will not only help startups access easy funds but also make them attractive to investors because of their wealth generation prospects.  

Setting up an expert committee to suggest measures to help attract investment and extending the tax incentive period for startups by one year from incorporation, will certainly aid in creating a healthy startup ecosystem, thereby giving fintech players a rapid push. 

Secondly, in addition to bringing the post-offices on central banking systems and setting up 75 digital banks, the government is also committed to their efforts to launch Central Bank Digital Currencies. This will expand the scope of Indian financial inclusion and increase the scope of access to fintech services for the common man. This will give a larger market for fintech players to target and grow. 

Compounding Fintech Impact 

By taking these well thought out steps in the budget, the government has just set the pace for compounding the fintech impact of India. With a focus on expanding MSMEs and startups in the country, fintech now plays an impactful role in providing these sectors with easy and quick credit and financial services, aiding them in their growth.  

Moreover, with trained minds and greater innovation, the fintech sector would be placed at a pivot where it would not only be a major driver for digital enablement but also a major driver for India’s livelihood, creating a compounding impact in the process. 

The 2022-23 budget has got all the ingredients right and has also charted out the recipe. The responsibility now lies on the fintech sector to take on the role of a chef and mix the ingredients to cook an economic multiplier which will create a new, robust Indian economy.