Explore the pulse of industries ahead of the upcoming budget as leaders, experts, and stakeholders weigh in on strategies, challenges, and expectations. Discover the insights, forecasts, and pivotal factors shaping the roadmap for growth in various sectors amidst evolving economic landscapes.
The expansion of the Trade Receivables Discounting System (TReDS) is a transformative expectation, not just confined to MSMEs but extending its horizons to non-MSME entities. This strategic move unlocks fresh opportunities, encouraging diversification and aligning with global practices. The incorporation of SEBI-approved funds into TReDS adds another layer, positioning it as a true exchange. This integration opens unique avenues for SEBI market participants and offers TReDS users the option to diversify funds, thus enhancing its global recognition.
Regulatory flexibility remains a top expectation, with a call for an environment that balances consumer protection with fostering innovation. The demand for a sandbox-like approach emphasizes the need for a controlled setting where fintech innovation can thrive. This adaptive regulatory stance is crucial for nurturing advancements while safeguarding consumer interests, paving the way for a dynamic fintech ecosystem that anticipates and addresses future challenges.
Support for incubators and accelerators is another vital expectation, recognizing that access to funding is a lifeline for startups and fintech firms. With a slight dip in funding in early 2022, expectations are high for Budget 2024 to introduce measures enhancing funding opportunities and simplifying the fundraising process. The budget’s focus on fostering an investor-friendly environment aligns with recent trends, showcasing a robust funding ecosystem that saw Indian startups raise a record $32 billion in 2022.
The Gift City is poised for growth, with stakeholders anticipating strategic allocations in infrastructure, regulatory enhancements, and technology integration. An inclusive budget fostering innovation and international collaborations is eagerly awaited, aiming to propel the Gift City into a new era of growth, resilience, and international prominence.
In the realm of taxation, there is a keen interest in potential GST rationalization measures. Expectations focus on adjustments that streamline processes, eliminate complexities, and foster economic optimization. A simplified and rationalized GST structure is anticipated to ease compliance and stimulate economic growth, promoting an efficient and transparent taxation system.”
Ashish Nayyar, Co-Head, India at OakNorth
“In the context of the digital lending industry, it is set for an unprecedented shift, projected to grow at a rate of 36% CAGR, further propelling the market valuation to $350 billion. Governmental initiatives such as India Stack and Account Aggregator are catalyzing this evolution, which is being supported by the industry as it embraces AI for assisted decision-making and leverages advanced data analytics to deliver efficiency and ensure customer-centricity. The industry is strategically positioned to lead this transformative journey, fostering collaborative business models to address the $300 billion credit gap in the MSME sector. This brings a pivotal opportunity for industry players to gear up to redefine their roles in bridging this crucial gap through data-driven insights and innovation, ultimately leading to the advancement of both the lending industry and the SMEs”.
Praveen Agrawal, Co-Head, India at OakNorth
“As we look forward to the year 2024, the Indian fintech industry is gearing up for an extraordinary leap, with market valuation expected to surpass $110 billion. Industry players are increasingly recognizing the imperative of adopting advanced technologies, which will be further supported by regulatory responsiveness. AI and machine learning will bring a new era in credit assessment, lending unparalleled speed and accuracy to decision-making and evolving regulatory frameworks will be key to maintaining the balance between fostering innovation and safeguarding consumer interests. In addition, the ethos of sustainability will be integrated into the lending practices, with ESG considerations taking center stage in decision-making for financial institutions. Further, user-friendly interfaces, accelerated loan approvals, and bespoke financial solutions will redefine the experiences offered to individuals and institutions alike to create a holistic and interconnected vision for the future of fintech.”
Krishnan S Iyer, CEO, NDR InvIT Managers Pvt Ltd
“Infrastructure and Logistics are critical components of an Economy, and are sure to play a vital role, in our march to a $5 trillion economy; in addition they also play an indirect role in the Social Development of the Country. The NLP that was formulated by the Government is a positive, and for it to have a greater impact, we are hoping for additional resources allocation, and a rationalization of taxes.”
Mr. Dilip Modi, Founder, Spice Money
“As we approach the upcoming Union Budget, it is imperative to recognize the pivotal role played by transformative innovations and developments in the fintech industry. The technological strides in this sector not only redefine our domestic financial landscape but also harbor the potential to reshape the global perception of Indian fintech
In the realm of Indian fintech, the expectations for the 2024 budget are substantial. A key anticipation is the fortification of the regulatory framework for the fintech industry in India. The unveiled draft framework aimed at regulating fintech activities stands as a testament to the acknowledgment of the escalating influence of fintech companies. Upon finalization, this framework holds the promise of guiding and nurturing responsible growth and innovation within the Indian fintech sector, contributing significantly to financial inclusion and broader economic advancement—a focal point we anticipate the budget to address.
Financial inclusion stands out as another critical aspect likely to be addressed in the budget. The announcement of the streamlined credit platform underscores the RBI’s commitment to facilitating easy access to credit for small businesses and individuals. This platform holds the promise of simplifying and expediting the lending process, rendering it more efficient for borrowers to secure essential financing. The ultimate success of these measures rests on their successful implementation and effectiveness—key considerations we anticipate the budget to underscore.
Furthermore, the collaborative efforts with key stakeholders, including SIDBI, NABARD, and the agriculture ministry, are pivotal in propelling India’s digital commerce onto the international stage. We expect the budget to shine a spotlight on the growth potential of ONDC and e-commerce for emerging India. The Indian fintech industry eagerly awaits the 2024 budget, aspiring for a comprehensive approach that acknowledges the vast potential of fintech to drive inclusive economic growth, empower individuals with modern financial services, and contribute substantially to the overall development of the nation in the digital era.”
Srivatsan Sridhar, Founder and CEO, Skydo
“An increase in the minimum revenue threshold for mandatory GST registration from INR 20 lakhs to INR 50 lakhs will help small scale suppliers minimize their compliance costs. Additionally, there is a need for clear guidance on the necessity of GST registration for businesses that are entirely focused on exports, considering their supplies are zero-rated.
Another key expectation is the simplification of the Input Tax Credit (ITC) refund process for exporters. The current disparity between the documentation requirements of the Foreign Exchange Management Act (FEMA) and GST is a significant hurdle. While FEMA and the Reserve Bank of India have eliminated the need for the Foreign Inward Remittance Certificate (FIRC), the GST department still demands it to confirm the receipt of export remittances in foreign currency. Aligning FEMA and GST documentation requirements will facilitate smoother operations for exporters, reducing bureaucratic hurdles and expediting the refund process.
These measures and adjustments to the GST framework will help simplify processes, reduce compliance costs, and enhance operational efficiency for small businesses and exporters”
Chulamas Jipatima (Amy), Country Director, MQDC India
“We eagerly await Budget 2024, hoping for policies that not only promote economic resilience and innovation but also streamline the ease of doing business. Co-working spaces have played an important role in molding the modern workforce, and we look forward to efforts that encourage the expansion of collaborative ecosystems.
We anticipate a future where workspaces are not only dynamic and inclusive but also supported by a reduction in the number of compliances, providing a more conducive environment for startups and entrepreneurs to thrive. As advocates for the entrepreneurial spirit, we hope for tax incentives and announcements that actively encourage startups to set up offices, fostering a culture of innovation and growth.
A predicted future where workspaces are dynamic, inclusive, and put people and technology first. There is a need for a budget that acknowledges the critical role flexible workspaces play in promoting economic development, and fostering the entrepreneurial spirit and well-being of the users.
Our dedication to delivering cutting-edge, flexible work solutions corresponds with the increasing demands of businesses, and we are hopeful about Budget 2024’s beneficial impact on the co-working scene. We believe that a budget aligned with these principles will not only drive economic development but also contribute significantly to the overall well-being and success of our users.”
Rahul Ahluwalia, Co-founder, Foundation for Economic Development
“India’s path to growth lies in prioritising exports to global markets, which are vast compared to the domestic Indian market. The government’s ambitious target of exporting goods and services worth $2 Tn by 2030, and the spectacular growth of electronics exports last year inspire confidence that policy-wise, we have the right targets in mind. However, till October ’23, India’s overall merchandise exports had declined by 5.5% year-on-year. This has happened, in part, because with an average MFN (most-favoured nation) tariff of 9.7% and a relative absence of FTAs compared to countries like Vietnam, India imposes the highest tariffs among prominent developing economies. High tariffs on imports result in costlier inputs and reduces the competitiveness of downstream Indian exports in international markets.
Since this will be a vote on account or an interim budget before the general elections, it is unlikely to have any big announcements. Still, reductions of import duties are well within its ambit. Given the government’s focus on exports, we think that the budget will reduce tariffs to foster competitiveness and enable Indian industry to thrive globally.”
Mr. Rahul Pagidipati, CEO, ZebPay
“2023 has witnessed significant developments in the crypto and web3 space. The blockchain sector has also demonstrated resilience and maturity, showcasing its potential to contribute to the country’s digital economy. The global market capitalization of crypto tokens has shown positive growth since the start of 2023 indicating increased acceptance and adoption.
In the spirit of collaboration between the government and the crypto sector, we look forward to the upcoming budget with optimism. Considering the positive strides made in discussions at the G20 summit, we believe that it is crucial to establish a regulatory framework. These developments, especially in reducing TDS and Capital Gains Taxes, would encourage a more inclusive participation in the crypto market. Moreover, a supportive regulatory environment will stimulate innovation, empowering the industry to transform existing businesses through the integration of blockchain technology. It will also pave the way for the creation of novel solutions, fostering the overall growth and sustainability of the crypto sector in the years to come.
We remain hopeful for a budget that recognizes the dynamic nature of the industry and provides the necessary impetus for its continued positive trajectory in the coming year.”
Mr. Abhinav Jain, Co-Founder & CEO, Almonds AI
“In Budget 2024, we hope for policies that nurture India’s tech innovation ecosystem. We need increased investments in R&D initiatives, particularly in areas like AI, robotics, and advanced materials. Additionally, incentives for attracting and retaining skilled tech talent through tax breaks for skill development programs and simplified visa processes would be greatly appreciated. The budget should act as a catalyst for India’s burgeoning startup ecosystem. We urge the government to consider easing regulations for startups, simplifying the funding process, and creating avenues for easier access to angel investors and venture capital.”
Mr.Prateek N Kumar, Founder and CEO – NeoNiche Integrated Solutions ltd.
“As a business leader eagerly anticipating the Indian Finance Budget 2024, my expectations extend to key reforms that encompass the agricultural sector. I anticipate measures aimed at revitalising the agrarian economy, with a focus on sustainable practices, technological innovation, and improved infrastructure for rural areas. Inclusion of comprehensive policies for the agricultural sector will not only uplift farmers but also contribute significantly to overall economic growth.
I hope to see initiatives that address the challenges faced by farmers, including access to credit, modern farming techniques, and market linkages. Implementing sustainable agricultural practices aligns with global trends and positions India as a responsible player in the global market.
Moreover, investments in rural healthcare and education are pivotal for creating a robust and skilled agricultural workforce. Streamlining regulatory processes in the agricultural domain, coupled with initiatives to enhance ease of doing agribusiness, will foster entrepreneurship and job creation in rural areas. A well-rounded budget, encompassing agriculture, will lay the foundation for a resilient, inclusive, and vibrant business ecosystem in India.”
Sandeep Goel, Managing Director, Moglix
Connectivity- physical and digital, has been the focus area of the previous union budgets of the government and is expected to continue in the union budget 2024. I think the next level digital penetration needs to happen across infrastructure project sites, power plants and sub stations and should attract greater outlay on SaaS investments with a vision to reimagine infrastructure-as-a-service and manufacturing-as-a-service. There is a pressing need to inject process discipline through digital project management to taper down cost and time overruns and efficiency leakages. Further, it would be great to see greater fiscal outlay on prescriptive artificial intelligence adoption in areas of essential goods like food, dairy products, rural health care, vaccination programs, and industrial safety to zero down gaps in the amenities that people need for ease of living. The vision of the budget should be to map India’s essential goods, core sector resources, and manpower on the SaaS cloud to create a one nation, one digital supply chain ecosystem for better quality of life.
Mr. Shailendra Singh, MD & CEO, BoB Financial
“India is experiencing a significant surge in the utilization of credit cards, particularly with a five-fold rise in demand for travel financing. In light of this, the government should look at exempting international spending of up to Rs 7 lakh from the existing 20 percent Tax Collected at Source (TCS) in the upcoming FY25 budget. This proposed measure aims to boost cross-border commerce, ease transactional complexities for consumers, and stimulate the tourism and hospitality sectors. By fostering a conducive environment for global transactions, we aim not only to enhance the cardholder experience but also to contribute to the overall economic growth.
In addition, we urge the government to continue its commendable efforts in strengthening the digital infrastructure while prioritising security of the consumers. Initiatives like UPI integration strongly reflects regulator’s commitment to innovative solutions, furthering financial inclusion and paving the way for a digitally empowered future.”
Sumit Kumar, Chief Strategy Officer, TeamLease Degree Apprenticeship
“Academia to be part of the Apprentices Act which is essential for implementation of Degree Apprenticeship under New Education policy, and facilitate tripartite agreement between industry, academia and the youth. This is essential to enhance the employability of the youth, and promote academia-industry collaborations. Given that, TPAs have played a vital role in scaling apprentices in the country, they should be incentivised based on new onboarding of organizations and apprentices. TPAs can play a vital role in scaling apprentices for SMEs. They should be allowed to have outsourced apprentices through TPAs or staffing organizations. PLI has scaled the scope of manufacturing and specially contract manufacturing, which has led to formal employment generation.”
Maneesh Bhandari, Founder and CEO, Growthpal, a M&A deal sourcing platform
● Parity in Taxation: They’re seeking equal treatment in taxation between listed and unlisted shares, particularly concerning Long-Term Capital Gain Taxes. Currently, there’s a disparity where investments in private shares are taxed at a higher rate of 20% compared to 10% for publicly traded shares. They propose aligning these taxes to incentivize investment in private companies, considering the higher risks involved.
● Concerns on Double Taxation: There’s a plea to address what’s seen as double taxation, specifically with capital gains taxes and dividend taxes. Investors perceive this as taxing profits twice—once as income and again when gains are realized or dividends are distributed. Singapore’s model, which doesn’t levy capital gains or dividend taxes, is highlighted as an example to consider.
● Impact of High Tax Rates: India’s high rates of capital gains and dividend taxes, compounded by additional surcharges for the super-rich, are viewed as discouraging both domestic and foreign investors. There’s concern that these high taxes could potentially prompt businesses to restructure, moving their core assets or intellectual property to low-tax jurisdictions.
● Encouraging Investment and Retention: Lower tax rates, along with minimizing or eliminating double taxation, are seen as imperative for India to attract more foreign investment. Additionally, this strategy is envisioned to support the growth of MSMEs, startups, talent retention, and the retention of critical intellectual property within the country. This shift in tax policy aims to curb the outflow of intellectual property and capital and encourage both domestic and international investments.
Overall, the VC community is advocating for tax reforms that incentivize investment, reduce double taxation, and make India more attractive to both domestic and foreign investors, fostering a conducive environment for economic growth and innovation.
Mr. Ankur Gigras, CEO and Co-founder, HexaHealth
“We want to see a comprehensive approach to healthcare spending in the interim budget of 2024. The expenditure on basic healthcare, which includes treating common health concerns, giving necessary medications, caring for mothers and children, immunising, and other preventative actions, has been one of the main problems with the Indian health system. Equitable supply and utilisation, focusing on marginalised groups, outpatient care, and dynamic cost coverage are what must be prioritised. Moreover, emphasis should be placed on innovative medical technologies like artificial intelligence, which may improve the quality of life for patients during operations, speed up insurance claims for required procedures, and raise the efficacy of healthcare delivery overall. In order to pave the way for a healthier, more technologically sophisticated future for our country, we hope that the budget will acknowledge these problems and actively support efforts to address them”, said Ankur Gigras, CEO and Co-founder, HexaHealth.”
Ashish Singhal, Co-founder and Group CEO, PeepalCo
India introduced its tax provisions for Virtual Digital Assets (VDA) two years ago, during the 2022 Budget. While the industry welcomed the definition and inclusion of VDAs in the Income Tax Act, certain provisions, such as the high TDS rate and the lack of offset have led many Indian VDA users to move to non-compliant foreign exchanges to trade, putting themselves at risk of losing their investment and breaking the law. It also led to lesser tax revenues for the exchequer.
As an FIU-registered platform compliant with India’s KYC and PMLA rules, CoinSwitch urges the Government of India to consider the following:
i) Reducing the Tax Deducted at Source (TDS) on VDAs, from 1% to 0.01%
ii) Allow offsetting and carrying forward losses from sale of VDAs
iiI) and treating income from VDAs on par with other capital assets
The Government of India has shown commendable leadership at the G20 to arrive at a roadmap for a global crypto framework, and has implemented domestic regulatory frameworks such as anti-money laundering that are in line with the global standards.
This could be the basis for India to reconsider its tax treatment of VDAs, which is an outlier, both domestically and internationally. Reducing the tax arbitrage that exists today will also help stem the flight of capital, consumers, investments, and talent, as well as dent the gray economy for VDAs.
Mr. Umesh Singh (Founder & CEO, Tara Candles)
“The MSME sector eagerly anticipates the Union Budget, with a focus on key provisions crucial for our growth and sustainability. Foremost among our expectations is enhanced access to finance, including easier credit availability and lower interest rates to facilitate business expansion. In Tax reforms we are looking for Section 194R introduced last year April-2023 has made impact on lower sales turnover to the MSME segment catering to the gifting industry leaving them in vulnerable conditions. This section should be reformed for boosting the MSME gifting industry. Infrastructure development remains a priority, urging increased funding for essential facilities like roads and logistics. We seek government support for technology adoption, innovation, and streamlined regulatory processes to ease operational complexities. Skill development initiatives and collaborations with educational institutions are essential to enhance our workforce capabilities. Additionally, we advocate for export promotion, cluster development, and risk mitigation measures to boost competitiveness and resilience. Our commitment to environmentally friendly practices also prompts a call for incentives for sustainable operations. As economic conditions evolve, we emphasize the dynamic nature of our expectations, underlining the importance of a budget that addresses the ever-changing needs of the MSME sector. Business associations and industry groups continue to play a crucial role in articulating and advocating for our specific needs during budget discussions.”
Amrit Acharya, CEO & Co founder at Zetwerk
“India’s manufacturing moment is now; and we need to seize it with a 25-year vision. We stand at a pivotal juncture for Indian manufacturing. With unprecedented tailwinds and favorable policy support received from the Government of India, the time is ripe to chart a bold 25-year vision. We must go beyond ‘Make in India’ and forge a self-reliant ecosystem through R&D investment, cutting-edge clean technologies, and robust skilling programs.
We, at Zetwerk, also feel that innovation isn’t confined to age. To truly unlock our potential, we must bridge the gap between established manufacturers and new-age companies through a level playing field. By collaborating and leveraging their combined experience and agility, India can achieve higher growth in manufacturing and become a factory to the world, thus securing not just economic growth, but a brighter future for all”
Mr. Rohit Gajbhiye, MD and Founder of LEO1
Mr. Unni Bhaskar, Managing Director of Uno Technology Private Limited.
“India, currently the world’s fastest-growing aviation market and the third-largest domestic market, has experienced a significant reduction in budget allocation for the Ministry of Civil Aviation (MoCA) over the last decade. The allocated funds dropped from Rs. 7,377.98 crores in 2014-15 to Rs. 3,113.36 crores in 2023-24. Despite this decline, I advocate for a 15-20% increase in fund allocation to the dynamic aviation sector, considering the government’s substantial infrastructure initiatives and the upcoming 2024 elections.
In 2019, a CAPA India report highlighted a disparity in passenger seat availability. There were only 0.13 seats per capita for Indians, compared to 0.52 for Chinese and 3.03 for Americans. The Finance Minister’s perspective on this low penetration—whether as a glass half-full or half-empty scenario—remains to be seen. The ambitious plan to invest US$ 15 billion in constructing 80 new airports by 2025 has generated enthusiasm within the airport construction industry. Also, the MoCA’s request for a 25-30% increase in the FY25 budget for the successful UDAN scheme, aimed at regional connectivity, could signify a positive turning point for the airport construction sector.
India has historically been a price-sensitive market, which has posed challenges to investments in cutting-edge airport infrastructure. However, the outlook is ripe for substantial technological advancements. With the private sector poised to assume a more influential role, we envision a profound shift in the landscape of the Indian aviation industry, setting the stage for a promising upward growth trajectory.”
Mr. Pawan Gupta, Co-founder and CEO Of Betterhalf.
”With the ‘Wed in India’ initiative generating optimism in the wedding industry ahead of the interim budget, Betterhalf aims to create jobs and extend professional services to 10,000 wedding vendors with a $5 million investment.
However, the industry faces a challenge with the current 18% GST on all services. We sincerely urge the government of India to consider reducing it to 5%, fostering growth, promoting online payments, ensuring better tax compliance, and contributing significantly to government revenue.
Aligning policies to support this sector is not just an investment in weddings; it’s an investment in economic prosperity. We eagerly anticipate the budget announcement, hopeful for policies that nurture industry growth and benefit the broader economy.”
Rahul Garg , Founder & CEO, Moglix
India is all set to touch USD 4 trillion in real GDP in 2024. The union budget 2024 is likely to sustain the infrastructure spending spree. The full budget in July is likely to see a fiscal expansion. I expect a greater approved budget for NHAI to reduce borrowing and therefore road development project costs. Also, I expect a higher outlay on local manufacturing of railway coaches for Amrit Bharat and Vande Bharat trains, development of railway stations, airports, and ports. Combined with an interest rate cut by the RBI the budget will be one among a long series of budgets for transforming India’s manufacturing and infrastructure sectors and push for India’s green transition. The startup revolution in India has taken off in a big way and a select few matured startups have grown sufficiently to go public. The honorable FM may like to consider the simplification of the regulatory framework for IPOs, for startups to leverage the power India’s equity markets. We are likely to touch a 7% real GDP growth rate comfortably.
Partha S Dash, Managing Director, Moglix
The union budget 2024 should continue to spell consistency in terms of direction and velocity of infrastructure development. The plans to build 91 airports and 100 smart cities are likely to get extended fiscal support. It would be great to see greater adoption of the bridge health monitoring system and predictive artificial intelligence to identify physical assets that need repair and maintenance and thus direct resources and fiscal outlay accordingly. I strongly feel that solar rooftop installations need to go mainstream in the household sector to truly give wings to India’s green transition and should figure on the honorable FM’s checklist. Lastly, I think there’s a need to simplify the regulatory framework so that EPC companies with an A++ credit rating can raise capital through issue of corporate bonds. It will inject greater liquidity into the EPC supply chain ecosystem for infrastructure and green energy projects without piling up risks of fiscal profligacy for the government.
Aditya Singh Poonia, Founder, Etrica Power
“As we approach the final Union Budget under the current government ahead of the impending general elections, Budget 2024 assumes the role of an interim budget rather than a comprehensive fiscal plan. Over the preceding five years, the government has diligently worked on bolstering national infrastructure, with a prospective shift in focus towards enhancing port and shipping facilities, promoting green and sustainable energy, and fortifying urban infrastructure. This budget presents a pivotal juncture for steering policies from carbon dependency to energy efficiency, necessitating the active involvement of financial services players in the fight against climate change. Incentivising investments in green bonds and renewable energy enterprises stands as a strategic move, contributing to India’s ambition of achieving net-zero emissions by 2070. We hope there will be increased focus on favourable policies and taxation to increase the adoption of renewable energy.”
Rama Mahendru- Country General Manager- India, Intrepid Travel
“Let this Union Budget 2024–25 re-emphasize the transformative power of tourism and the pivotal role infrastructure plays in shaping our global appeal. The potential of inbound international travel is huge in India and will get a further boost from the support of a budget that prioritizes the necessities, such as hygienic public spaces and increased security awareness, to guarantee that foreign guests have a great time. In addition to being beneficial economically, rewarding the businesses that are bringing in foreign money for the country and including incentives for the inbound tour operators under foreign trade policy demonstrates our dedication to international collaboration.
Also, the budget should focus on accessible entry to every historical site or monument, which is another aspect of the infrastructure that makes visiting by wheelchair-bound or elderly visitors easy.
Let’s make a hospitality-driven infrastructure our top priority when allocating resources so that it may further strengthen our reputation as a friendly destination while simultaneously promoting economic growth”
Vineet Agrawal, Co-Founder, Jiraaf
“As the alternative space expands, fixed continues to gain more prominence as well. While equity markets saw considerable growth over the last two decades, growth of debt market is critical for the country. Availability of debt across all segments of borrowers especially MSME & new age companies would fuel growth and employment. We are thankful to SEBI for taking measures in recent times to democratize the fixed-income space with initiatives like OBPP, making listing simpler and reducing face value for participation in debentures. We hope in the upcoming budget, the government would continue to bring down the difference in capital gains taxation between equity & debt to unlock more participation in credit instruments.”
Nikunj Agarwal, Head Debt & Lending Alliances · Propelld
“In light of the 2024 election, expectations are subdued regarding major shake-ups in the upcoming Interim Budget-24. However, there’s a strong call for measures to support liquidity-ease for new age financial players, particularly the NBFCs, serving as a lifeline for those struggling to access financial services. Additionally, the global spotlight on ESG practices—focusing on environmental, social, and governance aspects—raises hopes for added incentives for financial institutions championing these causes. NBFCs eagerly await financial support and acknowledgment of their positive contributions. If implemented, could potentially fortify the further sustained and inclusive growth.”
Sundeep Mohindru, Promoter and Director, M1xchange
Incentives for MSMEs to formalize
With over half of the $5tn economic dream of the nation resting on the shoulders of MSMEs, there have been several policy initiatives undertaken over the last couple of years to boost their productivity. The expectations from the upcoming budget, will be to continue upon that path through fiscal support. For instance, of the 6.3 crore MSMEs in India, only half are registered on Udyam – a platform that creates many opportunities for GST and non-GST registered small businesses to avail of government schemes, production related incentives and formal channels of credit. A major driver will be to bring the remaining half to register on Udyam, which will act as a catalyst for MSMEs to formalize and reap the benefits.
Support for financers to promote Small Business Working capital loan & Fiscal support for use of Analytics for Risk Management
The regulator has been prudent with corrective measures to stem inherent risks rising out of unsecured consumer lending, which has been growing rapidly due to digitization. It is important for the government to come out with supporting measures that compel banks and NBFCs to shift their lending portfolio more towards small business Working capital loans. Some measures could be in the form of incentives for banks and NBFCs to use technology to minimize risks while providing collateral free Working capital lending to MSMEs will be a win-win. Such support would not only boost business activity for banks but also facilitate the rebalancing of their portfolios.
Support for TReDS
TReDS has progressed decently well with all the three platforms together expected to facilitate INR 1.40 lakh crore of financing. This is nearly double of the financing facilitated at the end of FY22-23, which stood at INR 75 thousand crore. TReDS have benefits for all its stakeholders – facilitates collateral free, low interest working capital for MSMEs, provides banks and NBFCs with near zero defaults on their SME loan book and helps corporates improve cost efficiency through timely supply chain finance for their suppliers. With the government now bringing trade credit insurance as the fourth participant on TReDS to further support banks and NBFCs to go aggressive on Supply Chain Finance, it is important to allocate budgetary push to support insurers to quickly adopt the platform.
Under NCGTC, the CGFSF (Credit Guarantee Fund Scheme for Factoring) has been proposed to address coverage of the govt.-backed scheme for factoring transactions on TReDS. The govt shall advise to start active operations of this fund on TReDS at the earliest.
Allow TReDS 2nd Window
TReDS ‘second window’ is envisaged as ‘buyer less’ and removes the need of the buyers to accept the invoices. Unlike, TReDS, the ‘Second Window’ will offer a ‘with recourse’ supplier financing for MSME sellers, backed by advanced analytics and access to consent driven, publicly available databases such as GSTN, AA, PCR etc.
One of the possible solutions in providing Buyers acknowledgment on TReDS using GSTN is envisaged through combination of liberated data and agreement between MSME sellers and TReDS platform lenders, for obtaining cash flow lending for its various invoices. Various India Stack Open APIs integration into TReDS platform will facilitate MSME onboarding , invoice verification via GST ,MSME bank transactional cash flow data, GST data, past loans, and credit history, repayments tied to electronic liens on cash inflows.
Measures to address delayed payments to MSMEs
The MSMEs’ desire for credit has significantly increased, but there is still a Rs. 20–Rs. 25 trillion credit gap in the industry as a whole. One of the primary obstacles encountered by these MSMEs is the problem of delayed payments. This hampers the working capital flow and competitiveness of these enterprises in the market, preventing them from seizing new possibilities and fulfilling orders. Based on statistics accessed through the government’s MSME Samadhaan portal, which tracks issues related to delayed payments, only 33,262 of the 1.68 lakh complaints have been resolved. To achieve the government’s goal of increasing the contribution of MSMEs to the GDP from 30 percent to 50 percent by 2025, it is necessary to establish policy frameworks that specifically target these challenges faced by MSMEs and help in resolving them.
Making TReDS a Unified Platform for MSME Payments :- Paragraph 4.8 of report by Standing Committee on Finance (2020-2021) presented to Seventeenth Lok Sabha for The Factoring Regulation (amendment) bill, 2020, stipulate : “The Committee’s opinion is that the compulsory listing of all GSTN invoices on the TReDS and the consequent tracking of when these payments are made, provides excellent economic data on the state of the economy. It will also provide valuable credit information to enable credit scoring of various companies and government entities.”
To implement this a simple extension of the role of TReDS as a unified platform for all receivable payments of MSMEs has the potential to address purpose outlined above
Madhusudan Ekambaram, Co-Founder & CEO, KreditBee
In 2024, amidst a global economic growth projection of 3%, India stands out with an impressive 6.3% growth forecast. This growth is attributed to robust financial inclusion, strong consumer demand, a youthful demographic, and improving trade balances. However, challenges loom, including disruptive forces like higher interest rates, regulatory assertiveness, climate change, and geopolitical tensions. In the financial sector, innovative banking models, digital payment reforms, and the rise of fintechs are set to boost India’s financial inclusion and credit cycle. The focus now shifts to enhancing digital inclusivity, with banks and NBFCs spearheading digital transformation initiatives.
As we look ahead to the upcoming interim budget announcement, there are two critical areas that warrant attention for the continued growth and resilience of the financial sector. Firstly, we urge the government to consider easing rules towards reverse flipping foreign holdco entities, fostering a more conducive environment for international investments. Secondly, addressing the challenges faced by NBFCs due to increased Risk-Weighted Assets (RWA) is paramount. This has inadvertently elevated the cost of borrowing from banks, impacting the crucial role NBFCs play in extending credit to various sectors of the economy. Streamlining RWA norms will not only ensure a more efficient lending ecosystem but also contribute significantly to the overall economic stability, fostering a more conducive environment for listing in Indian Markets.
Manas Mehrotra, Founder, 315Work Avenue
Coworking industry expects multiple reforms from the upcoming interim Union Budget
The coworking industry has become more relevant than ever with the demand surging significantly in the recent times owing to its affordable pricing options and flexible work culture. Large enterprises too have shifted gears to coworking space as they embraced the hybrid work model to suit their organizational requirements. India continues to be the fastest growing flex office market in the APAC region and is set to account for one-fifth of the office market by 2030. Taking into consideration the popularity of hybrid working, we have a few expectations around GST and taxation from the upcoming interim Union Budget that can further accelerate growth of this sector.
Some of the measures that we could look forward to include lower GST rate for small-scale coworking clients. This will significantly help the coworking industry boost their footprints by attracting small start-ups to be part of the industry as well as increase the revenue collection to the government. The salary upper limit of 25k could be enhanced to 40k and timeline from 3 yrs to 5 yrs to enable start-ups/coworking entities to enjoy the benefit of sec 80JJAA as these industries are generating a greater volume of employment. Input tax credit under GST is an important issue that concerns coworking sector. We expect the budget would enable coworking firms to claim input credit on work contract and construction services supplied so that it is passed on to companies who lease out space for coworking and thereby reduce their overall costs.
Typically stamp and registration duties are high and since both the landlord as well as client agreements are subject to these charges, hence, either concession in such stamp duty rates or allowing twice the duty paid as expenditure under income tax will encourage even the small agreements to get registered. An important requirement for the coworking industry has been Lower/Concessional rate of TDS which will improve the working capital. Another measure that could be announced to intensify growth of the coworking sector is a further and continued extension of tax holiday for start-ups as they would be motivated to scale up their business and enhance investment.
A significant push to infrastructure and single-window clearance system will help in faster establishment of coworking spaces in non-metro cities as well. Overall, the coworking sector, is expecting continued improvement in the ease of doing business which will play an important role in the growth of coworking industry in the near future. Going forward, we hope that the government looks at addressing regulatory concerns and encouraging more coworking firms to open-up through a series of both financial and non-financial incentives and ensure faster economic growth.
Naivedya Agarwal, Co-founder & CEO, Runaya group
The Government of India has taken commendable strides, implementing favourable policies that have catalysed the evolution of a vibrant startup ecosystem within the nation. While acknowledging these achievements, we earnestly encourage the government to persist in its support, fostering an environment conducive to ongoing innovation and growth in the startup landscape.
A critical facet requiring attention is the existing exemption, currently applicable solely to Domestic Startup Companies registered post 1st Oct 2019, thereby omitting LLPs and entities registered before Oct 2019. Our plea to the government is to extend this provision to encompass LLPs, promoting an inclusive startup and business culture. Additionally, in alignment with the government’s commitment to nurturing startups, a reconsideration of eligibility criteria for entities registered post-2016 would further enhance the ecosystem’s cohesion.
Acknowledging the dynamic nature of startups, an extension of the exemption timeline linked to manufacturing commencement from 31.03.2024 to 31.03.2025 is proposed. This adjustment recognizes the burgeoning startup landscape, providing a more realistic timeframe for startups to establish manufacturing units and contribute meaningfully to the economy.
Furthermore, the turnover limit for tax exemption eligibility warrants review. Suggesting alignment with MSME provisions for medium enterprises, we propose an increase in the turnover limit from Rs 100 Cr to Rs 250 Cr. This adjustment aims to level the playing field, facilitating the growth of startups into larger entities without compromising on associated benefits.
Addressing the critical issue of rare earth reserves, we advocate for the classification of rare earth mineral mining under the ‘Make in India’ campaign. Proposing the establishment of a dedicated rare earth mission akin to the India Semiconductor Mission and the introduction of PLI schemes for the rare earth and magnet manufacturing industries, we aim to encourage domestic production, mitigating dependence on imports.
In sectors such as aerospace and chemicals, the reliance on imports for critical materials like Aluminium Powder is a notable concern. To address this, we suggest including aluminium powder under the ‘Make in India’ campaign and implementing PLI schemes for domestic manufacturers, fostering self-reliance and contributing to the growth of these industries.
As we collectively navigate towards a sustainable and self-reliant future, we firmly believe that these proposals will not only support the startup ecosystem but also significantly contribute to the overall economic development of Bharat. We eagerly anticipate the Union Budget positively addressing these concerns, fostering a thriving environment for innovation and sustainable manufacturing.
P. Venkatesh, Director, Thought Leadership, Maveric Systems Limited
In anticipation of Budget 2024 being a Vote on Account, we do not foresee major announcements but expect a continuation of fiscal prudence and a commitment to addressing the people’s needs. It is crucial to ensure that allocations for key employment generation schemes, such as MGNREGA, PMGKRA, and NRLM, mirror the levels of the preceding fiscal year, emphasising stability and sustained support for crucial programs.
The budget should maintain a focus on schemes like –
Production Linked Incentive (PLI) scheme that provides incentives to companies to encourage manufacturing activities based on their production performance.
High-risk, High reward that supports startups with potential for high impact but also high risk
PRISM (Promotion of Innovation in Small & Medium Enterprises) aimed at fostering innovation in small and medium enterprises.
Biotechnology Ignition Grant focused on supporting early-stage startups in the biotechnology sector.
In line with our expectations, the budget should prioritise subsidies for the poor, encompassing essentials like food, fertiliser, and petroleum. This commitment to supporting the under-served is integral to ensuring social welfare and stability. Additionally, the budget should concentrate on sustainable income growth in rural households, reinforcing the government’s commitment to inclusive growth. By aligning with these principles, Budget 2024 can play a pivotal role in fostering economic development and promoting an inclusive and resilient society.
Bharath Rao, Co-Founder / CEO, Emobi
One of the foremost things that the industry is keenly expecting is the changes in the FAME 2 subsidies in the Union Budget 2024. This is one of the most significant aspects and the entire ecosystem is waiting to understand how the subsidy terms will be tweaked and extended. A significant trend which I foresee will bring a new twist to the market is the rise of battery swapping companies.
Another aspect I urge the Government to consider is the difference in GST rates. Currently. EVs sold with included batteries have a 5% GST, while those sold without, especially for battery-swapping, face an 18% GST. Additionally, purchasing lithium batteries separately incurs an 18% GST, compared to the 5% GST when included in the EV purchase. This makes it difficult for companies investing in battery-swapping technology. The industry is looking forward to a budget that levels the playing field, encourages new ideas, and pushes the EV industry toward a sustainable and balanced future.
Mr. Partha Neog, CEO and Co-Founder of Vantage Circle
“We eagerly await the Union Budget 2024 with expectations aligned to the unique challenges and opportunities in the MSME and Technology sectors. We hope to see significant growth in these sectors with this year’s budget.
As we already know, MSMEs are the country’s backbone, contributing to large-scale income generation and India’s overall economic growth. We expect the Union Budget 2024 to ensure financial support mechanisms to the MSME sector so that we have a more conducive environment for innovation and expansion. At the same time, we also expect significant improvement in the dynamic technological sector by including incentives for R&D programs and the adoption of Gen AI, which will further revolutionize the overall landscape of HR technology.”
Alok Dubey, Chief Finance Officer, Acer India
“The upcoming Union Budget 2024 has the potential to shape the IT Tech sector in the next fiscal year. As we anticipate Budget 2024, our expectations revolve around fostering India’s tech innovation ecosystem. We look forward to heightened investments in Research and development and Artificial Intelligence, underlining a strategic roadmap emphasizing innovation, sustainability, and accessibility within the industry. Aligned with the Make in India initiative, we expect that the Production Linked Incentive (PLI) program, designed to support IT hardware and computer server manufacturers, along with the government’s resolute commitment to digital skill development, will be accorded significant priority. We anticipate a budget that not only aligns with but elevates the Make in India objectives, providing a robust framework for the growth and alignment of the IT Tech sector.”
Pradeep Misra, CMD-REPL, Rudrabhishek Enterprises Limited
As the Government of India is preparing to present the interim Union Budget for the fiscal year 2024-25, the Real Estate and Infrastructure sectors are keenly anticipating policy measures that can provide a boost to their growth and address the challenges they face. The real estate sector has been grappling with issues such as liquidity constraints, delayed projects, and subdued demand. Stakeholders in the industry are hopeful that the budget will introduce measures to ease liquidity, possibly through financial incentives or relaxations in financing norms, to stimulate construction activity and revive the housing market.
The housing demand in India is expected to be driven by affordable housing sector. It will be a great impetus to the sector if the government announces extension of PMAY program. The current PMAY covers only the houses sanctioned till March 2022. However, the increasing urbanization requires the program to increase its coverage. PMAY has proven track record of not only addressing the ‘Housing for All’ issue but also leaving a direct positive impact on livelihood betterment, enterprise development, social equity and gender empowerment. The sector eagerly looks for extension on PMAY 2.0 for another 5 years.
To boost non-housing sector of real-estate, initiatives can be announced to formalize investment in GOI approved MSM-REIT. Tax incentive for investors of MSM-REIT during initial five years can be proposed, this will help in formalizing investment and boosting non housing real estate sector.
In the infrastructure sector, there is an expectation for increased allocation of funds to support ambitious projects aimed at enhancing connectivity, such as the development of highways, railways, and airports. The sector also anticipates reforms that streamline regulatory processes, making it easier for projects to navigate approvals and timelines. Additionally, a push towards sustainable and green infrastructure is expected, aligning with global trends and environmental concerns. By incentivizing eco-friendly practices and renewable energy integration into infrastructure projects, the budget can contribute to India’s commitment to sustainability.
Furthermore, both sectors are looking for more robustness in RERA and GST. A consistent and transparent regulatory environment will instill confidence among investors and developers, fostering a conducive atmosphere for growth. Overall, the Real Estate and Infrastructure sectors are optimistic that the Union Budget 2024-25 will offer strategic interventions to address their concerns, facilitate growth, and contribute to the broader economic recovery in the post-pandemic landscape.
Ritesh Kumar, MD & CEO, HDFC ERGO General Insurance
“The Indian economy is one of the fastest growing economies in the world, and is well positioned for strong growth over the medium term. The Insurance industry has consistently played the role of a partner in securing the economic growth of the nation. We appreciate the steps taken by the Government and the IRDAI to transform the insurance sector and truly believe that they augment the industry’s efforts of achieving insurance penetration till the last mile. In line with the IRDAI’s vision of ‘Insurance for All by 2047’, there is a need to reconsider the GST rate of 18% on health insurance policies in the upcoming Union Budget, thereby improving the affordability for our citizens.”
Manhar Garegrat, Country Head, India & Global Partnerships at Liminal Custody Solutions
As India strides towards the forefront of the digital asset revolution, secure custody solutions are laying the foundation for a new era of financial inclusion. However, unlocking the full potential of this transformative asset class demands a robust ecosystem built on clarity, innovation, and talent. The upcoming Union Budget 2023 presents a pivotal opportunity to pave the way for a thriving digital asset landscape, and Liminal proposes the following key expectations:
- Clarity in VDA Definition and Tokenization:
The current broad definition of Virtual Digital Assets (VDAs) in Notification no. 74 of 2022 needs to be more nuanced. The tokenization of real world assets is a $10 trillion opportunity and we are already witnessing the rapid advancements in the field of tokenized RWAs. There is an urgent need for investment and innovation in these segments, if nurtured with progressive policies, India has the potential to become a global leader in the digital asset space.
We urge the government to amend the VDA definition, explicitly excluding tokenized assets with proven underlying value, similar to established precedents like gift card exemptions. This targeted revision will foster a dynamic and inclusive digital asset ecosystem.
- Removal of 1% TDS:
The introduction of a 1% Tax Deducted at Source (TDS) in 2022 led to an estimated loss of $420 million in potential government revenue due to migration of Indian crypto traders to overseas platforms. This highlights the detrimental impact of policies that disincentivize domestic participation in the digital asset market.
We propose offering tax breaks for the development of blockchain security infrastructure and the implementation of advanced security protocols. This incentive will attract investment, generate high-skilled jobs, and solidify India’s position as a global leader in secure digital asset custody.
Just like stocks, users should be allowed to offset losses related to digital assets which will encourage more startups to enter this space.
Government should look at creating special economic zones for Web3 startups and offer tax holidays to startups during initial years so that entrepreneurs can focus on innovation and product development without worrying about cash flows.
- Prioritising Research and Development:
We urge the government to create equal opportunities for Web3 projects by enabling active participation in government sandboxes. The requirements for inclusion in government sandboxes should be more relaxed to create a more inclusive and encouraging Web3 startup ecosystem. Excluding digital assets from such initiatives may not unlock the full potential of blockchain projects and could limit their viability in the long-term.
Fostering a culture of innovation in blockchain-based security solutions and compliance tools is crucial to ensure the resilience and sustainability of the digital asset ecosystem. India’s vibrant tech landscape presents an ideal breeding ground for developing cutting-edge technology solutions.
We call for strategic investments in research and development (R&D) initiatives specifically focused on digital asset security and compliance. This commitment will empower Indian companies to contribute significantly to global solutions and maintain India’s competitive edge in the digital asset space.
Shivam Thakral, CEO of BuyUcoin, India’s second-longest running digital asset exchange
The Indian crypto industry stands between boundless potential and frustrating limbo. In the upcoming budget, we urge the government to replace uncertainty with clarity, not with a heavy hand but with a guiding light. A well-defined legal framework can unlock trust and fuel growth. This framework should address taxation complexities, establishing clear guidelines for income and transactions, not as barriers but stepping stones. Exchange licensing protocols should not be shackles but a badge of honor, ensuring responsible participation.
Seamless integration with traditional finance is possible by fostering collaboration and driving mainstream adoption. We understand the need for investor protection, but overzealous regulations could hurt our nascent ecosystem. Let’s find the sweet spot that fosters innovation while ensuring responsible participation, allowing India’s crypto industry to bloom, attract global players, and nurture domestic startups.
Clarity alone isn’t enough. Imagine India as a fertile field; crypto and blockchain are the seeds waiting to sprout. We need tax incentives and sandboxes to nurture these seeds into thriving startups. Sandbox initiatives need protection to foster experimentation. This will create a new generation of jobs, propel India into the global DeFi and blockchain space, and unlock economic growth. By embracing crypto with vision and collaboration, India can lead the world towards a digitally inclusive financial future, leaving competitors in the shade.
Om Malviya, President at Tezos India, a blockchain adoption entity
While India’s potential in blockchain is undeniable, it faces many roadblocks. Ambiguity around legal status hinders startups as they hesitate to navigate uncharted territory. Tax complexities leave them burdened, their wings clipped before they can soar. Talent that fuels innovation remains scarce, creating a bottleneck within the ecosystem. The upcoming budget holds the promise to remove all these roadblocks and clear the path.
The taxation around digital assets, especially the TDS on transactions should be revisited by the relevant authorities. The exemption limit short term capital gain tax should be relaxed to make digital assets more user friendly.
A comprehensive framework embracing diverse applications, from healthcare record-keeping to secure voting systems, is the need of the hour. Clear taxation guidelines and talent development initiatives targeted at building a skilled workforce would propel nascent startups. Sandbox projects and government collaboration will nurture trust and bridge the theory-practice gap, transforming ideas into tangible solutions. Embracing blockchain is not just an economic decision; it’s a chance to empower millions with unprecedented transparency, efficiency, and security. It’s about building a future where trust replaces mistrust, and everyone has a seat at the innovation table.
The upcoming budget holds immense significance for India’s growing blockchain ecosystem. We call for clearer regulatory pathways. A comprehensive framework embracing diverse use cases, from healthcare and supply chain management to governance and identity verification, would unlock transformative potential. Tax incentives for blockchain-based startups and R&D initiatives would attract global talent and foster an environment of innovation.
Shomiron Das Gupta, Founder, DNIF Hypercloud
“As India’s IT sector continues to drive economic growth, the escalating scale of cyber threats demands urgent attention in the upcoming 2024 budget. According to a Singapore-based cybersecurity firm Cyfirma, a staggering 278% surge in state-sponsored cyberattacks on India between 2021 and September 2023, primarily targeting services companies, especially in the IT and BPO sectors. The report also revealed a significant 460% increase in cyberattacks on government agencies and a substantial 508% rise affecting startups and SMEs during this period.
To address these challenges, the budget must strategically prioritize cybersecurity, directing resources towards resilient digital infrastructure. Investment in training programs and upskilling initiatives is essential to cultivate a skilled workforce capable of tackling sophisticated cyber threats. A focused increase in university education for the cyber industry will contribute to building a competent talent pool. Additionally, allocating resources to bridge skill gaps and enhance awareness is crucial for creating a cyber-resilient nation. The budget should earmark funds for the development of cutting-edge cybersecurity technology to stay ahead of evolving threats. Strengthening regulatory mandates in the industry will provide a solid foundation for a secure and thriving digital ecosystem. As a result, we believe the 2024 budget is pivotal in fortifying India’s digital landscape and securing the future of the IT sector.”
Deepak Tiwari, CEO, KSH Logistics
“In the 2024 budget, we look forward to transformative measures that can propel the logistics and warehousing industry into a new era of efficiency and inclusivity.
Labour law reform is a critical aspect of streamlining operations. Also, reduced interest rates for investments in CAPEX, Automation, and Technology will not only stimulate growth but also drive innovation within the industry. We hope for financial incentives that promote gender neutrality, encouraging the employment of more women and the third gender, and fostering a diverse and inclusive workforce. Furthermore, an infrastructure push in Tier 2 cities will not only decongest urban centres but also create new hubs for warehousing, facilitating better regional connectivity.
As we await the budget announcement, we look forward to a roadmap that supports our vision for a progressive, technologically advanced, and inclusive future in the warehousing sector.”
Mr. Jimmy Patel, MD & CEO, Quantum AMC:
“In the last two terms of the Modi-led-NDA government copious structural reforms, viz. Make In India, Production-Linked Incentive (PLI) scheme, Start-up India, National Single Window System (a digital platform to help businesses apply for approvals from central and state governments), Skill India, Digital India, development of India’s core infrastructure, financial inclusion for all, Housing For All (also known as the Pradhan Mantri Awas Yojana), RERA, renewal energy, tax reforms such as GST, corporate tax cuts, the Insolvency and Bankruptcy Code, creation of bad banks (as part of a wider strategy to clean up the balance sheets of banks), merger of PSU banks, and many social others have been rolled out and implemented. In short, the government laid the path to economic reforms and progress.
Today, the World Bank sees India fastest-growing economy of the seven largest EMDEs. Similarly, the International Monetary Fund (IMF) observes India as a “bright spot” — and rightly so, because of several reforms of the government and prudent monetary policy actions of the RBI. The Equity AUM of Indian mutual funds, as a consequence, has also reported a phenomenal rise with very encouraging participation from individual investors, both retail and HNIs.
Interestingly, individual investors (retail and High Net worth Individuals) today, hold a relatively higher share of the industry’s assets (59.2% as of November 2023). India’s mutual fund industry AUM-to-GDP ratio — which represents the penetration of mutual funds in the economy — is currently around 15% compared to 7-8% a decade ago. Although this ratio is low compared to the global average of around 75%, a remarkable increase in AUM is quite evident.
For deeper penetration of the mutual funds, i.e. for a bigger pie of the households’ financial assets, along with investor education, I believe, the government should also consider making mutual fund investments more tax efficient. Many of the long-standing expectations of the Indian mutual fund industry haven’t been honoured by the government so far. We expect the budget to address the difference in tax treatment between equity mutual funds and Unit linked Insurance Plan (ULIP).
At present, when it comes to capital gains of ULIPs, if the annual premium is less than Rs 2.5 lakh, the returns are not taxed. It is important to bring both ULIP and equity mutual funds on par as regards taxation (since ULIPs are essentially investment products providing some risk cover).Furthermore, the government should revise the definition of equity-oriented mutual fund schemes by including equity Fund of Fund (FoF) schemes. For instance, even an equity FoF is regarded as debt-oriented from a tax standpoint. An equity FoF should be on par with equity-oriented mutual funds for taxation.
Similarly, the Intra-scheme switches, i.e. switching of investment within the same scheme of a mutual fund. Switches should be exempt from payment of capital gains tax as no gains are realised in such a case. Therefore, we suggest that amendments must be made so that switching of units from (a) Regular Plan to Direct Plan or vice-versa; and (b) Growth Option to Income Distribution cum Capital Withdrawal (IDCW) Option or vice-versa, within the same scheme of a mutual fund are not regarded as ‘transfer’ and hence, shall not be charged to capital gains. Moreover, we also propose that when an investor moves or switches his investment from one equity scheme to another equity scheme within the fund house, the government should consider exempting the capital gains (since it’s a case of simple allocation of the funds).
Additionally, since Indian bonds would now be part of the JPMorgan Global Bond Index and Bloomberg indices from mid-2024 onwards (expected to bring billions of dollars of foreign money into the Indian debt market), we also suggest introducing Debt Linked Saving Scheme (DLSS) on the lines of Equity Linked Saving Scheme (ELSS). This would channelise the long-term savings of retail investors into high-quality debt instruments with tax benefits, helping in deepening the Indian Bond Market. DLSS shall enable small investors to participate in bond markets at low costs and lower risk compared to equity markets.
We also propose allowing mutual funds to channelise retirement savings with the government providing tax incentives. A Mutual Fund Linked Retirement Scheme (MFLRS) with the same tax concessions available to the National Pension System (NPS) be permitted. A majority of NPS subscribers are from the government and organised sector. The MFLRS could target individuals who are not subscribers to NPS, especially those from the unorganised sector, providing them with an option to save for a vital long-term goal such as retirement coupled with tax benefits.
Although we understand that this is an interim budget — a vote of account — before the Lok Sabha elections 2024, but many of these suggestions are structural reforms for greater financial inclusion with mutual funds. If these see the light of the day in time to come, it would be a win-win for investors and the industry.”