The budget 2021 brings an overall positive sentiment with lots of moves that would cheer up the Covid-hit economy.
By Nitin Chavan
It is heartening that the budget 2021 is built on the core pillars of inclusive growth and innovation. In addition, three main areas vital to overall economic growth will be enhanced by an all-important digital drive focused on digital payments, innovation, and start-ups. We believe that the numerous initiatives announced by honourable Union Finance Minister Nirmala Sitharaman will help stimulate the country’s economic growth.
In order to stimulate the economy through digital and autonomous consumption, the government has announced significant initiatives. The proposal to set up a Global Fintech Hub GIFT by the government demonstrates strong government intent and purpose for the future of the banking industry. This will boost the development of innovative financial technology services and products.
In addition, the government has allocated Rs 1,500 crore for the promotion of digital payment modes in the budget 2021. For those who digitally transact 95% of their transactions, the tax audit threshold has been increased from Rs 5 crore to Rs 10 crore, reflecting strong government encouragement for digital footprints.
The government is also considering to on-board 1.3 crore merchants and thereby help raise the number of digital transactions to Rs 6000 crore. The government is also eyeing a 20% increase in the number of digital transactions in FY 2021-22. This represents the excellent opportunities fintechs have for constant innovation, and to help bring about large-scale rural adoption of the technologies.
In this competitive climate, the extension of the capital gains tax exemption for investment in start-ups by another year helps foster the culture of start-ups and makes them feel welcomed.
The government has also announced a change in the Companies Act and promoted the incorporation of one-person companies to help stimulate innovation in start-ups in the budget 2021. In addition, they have concentrated on R&D and the development of skills for individuals in artificial intelligence (AI) and machine learning (ML). This will go a long way to make the citizens future-ready.
In this competitive climate, the extension of the capital gains tax exemption for investment in start-ups by another year helps foster the culture of start-ups and makes them feel welcomed.
The creation of a separate Asset Rehabilitation Syndicate to deal with the NPAs is an essential step in the right direction; it will promote stronger recovery and enable banks to increase credit—a vital need in today’s times. The recapitalization of Rs 20,000 crore in PSBs in budget 2021 is also a much-needed move that will strengthen banks and, in turn, increase the capacity of credit construction.
Increasing Capex by approximately 35% to Rs 5.54 lakh crore in budget 2021 would result in a dramatic rise in capital expenditure and will be an optimistic catalyst to revive business growth.
In budget 2021, some decisions have been taken by the government to ease the functioning of MSMEs, raising the threshold limit of paid-up capital for small businesses from Rs 5 million to Rs 20 million, which will ease the enforcement burden for micro-and small businesses. In addition, the planned use of data analytics, artificial intelligence, and machine learning, and the inclusion of additional modules in the MCA-21 database, as cases of fraud have become increasingly widespread would help to improve corporate governance.
Increasing Capex by approximately 35% to Rs 5.54 lakh crore in budget 2021 would result in a dramatic rise in capital expenditure and will be an optimistic catalyst to revive business growth. For 2020-21, the fiscal deficit was much higher than anticipated at 9.5%, but it is forecast at 6.8% in the year 2021-2022. In addition, the government provided the fiscal consolidation roadmap and achieved less than 4.5% of GDP by FY25-26.”
Also Read: Economic survey 2020-21 decoded
(Nitin Chavan is CEO of Aquapay Payments Technologies (P) Ltd, a FinTech firm that deals in enterprise payment solutions.)
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