Steps taken towards boosting Digital India have been overwhelming. Essentially, the impact will have two legs, one being building infrastructure and other enhancement of digital services. Establishment of a national programme to direct efforts in artificial intelligence, setting up 5 lakh Wi-Fi hot spots, establishing of ICT infrastructure, setting up of national programme for cyber space and doubling the budget for the Digital India program, all adds to the strengthening of the infrastructure. It will provide impetus to key sectors such as telecom, education, consumer products and retail, financial services, among others and also boost start-ups and FinTechs.
On the services front, establishing separate regulator for payments and the use of blockchain technology will give a fillip to digital payments, ensuring greater security. Payments at toll booths becoming completely cashless will hugely benefit the transportation industry. Furthermore, focus on integrating data sources like GSTN, Trade Receivables Discounting System (TReDS), Corporate Aadhaar number among others will help businesses significantly.
Impact on MSMEs
FM has put major focus on driving MSME growth by various schemes in 2018 Budget, including 3 lakhs crore funds to be made available through MUDRA scheme. However some of the key initiatives like integrating GSTN and TReDS data and creating Aadhaar like unique ID will help in achieving exponential growth of online credit to MSME through digital platforms. This will cut down manual interventions for credit assessment, cash flow validation, KYC, disbursals and collections. This will also help financial institutions keep check on fraudulent activities and use of funds. With the use of integrated digital platforms, NBFCs, Banks and MSME Financing institutions can collaborate online with a single loan application platform to asses overall fund requirements and underwrite risk based on their individual portfolio strategies. This linkage of GSTN and TReDS data through digital platform adoption will lead to faster TAT, reduced acquisition cost, reduced operating costs and flexibility of loan products, which can further reduce cost of funds to MSME sector. To summarise, by retaining budget allocation to MUDRA scheme and linkage of TReDS with GSTN, the government has ensured both funds being available and can be deployed faster to MSME sector.
Impact on Start-ups
While Finance Minister has not detailed out his plans to support start up ecosystem and angel and VC investment, from the focus he put on MSME, Digital, eEducation and ICT infrastructure, it’s clear that government will leave no stone unturned in making India among the top few countries globally which have utilised full potential of the combined power of entrepreneurship and technology. While specific measures will be made clear in coming days, government seems to be listening to the noise made by Angel and VC community about tax issues and support it requires to be in the league of other successful start-up / Fintech hubs globally.
Seth is Partner, Financial Advisory Service at EY India.