Budget 2023 scores well for inclusion, with few misses
India’s Budget 2023-24 has some interesting proposals for furthering the digitalization of the ecosystem, also making compliance and credit needs met more easily, especially for small businesses. Of all the proposals in the Finance Minister’s Budget presented in the Parliament, we pick three big positives, two that show promise but need more clarity and one that clearly sets the cat among the pigeons.
The three that stand out for significant impact on financial inclusion and the digital ecosystem: a new section 158A in the Finance Act enables businesses to share their own GSTN data electronically with consent, giving a big boost to the account aggregator framework; second, a one stop solution for reconciliation and updating of identity and address using DigiLocker and Aadhaar will ease KYC compliance and third, building a digital public infrastructure for agriculture as an open source, open standard and inter operable public good will help agri-tech solve for small farmer needs.
Two proposals that have been set out without much clarity at this stage but show promise – a national financial information registry which will be the central repository of financial and ancillary information, to “facilitate efficient flow of credit, promote financial inclusion, and foster financial stability.” This will need legislation in consultation with the RBI. The second is a National Data Governance Policy, with access to anonymized data, with the aim of unleashing “innovation and research by start-ups and academia.” At ICFI we have been strong advocates for more data in the public domain, and a data dissemination policy was on our wish-list from the Budget.
Finally, one brief sentence with regard to digital payments - “Fiscal support for this digital public infrastructure will continue in 2023-24” - may not appeal to the payments industry as it does not address the contentious issue of charges and the need for covering investment costs on technology, customer redressal, merchant acquisition etc. for sustainable growth. This year, the government had given Rs. 2600 crores as incentive, while the payments industry’s ask for the year ahead was Rs. 8000 crores. Hopefully, dialogue between the payments industry and the Finance Ministry over the year will work towards resolution. Our ask from the Budget was that the Ministry should institute a costing exercise to estimate and ensure adequate financial support and a mechanism of charges such that all players in the value chain are adequately compensated, either through the market mechanism or through government incentive.
One of our asks from the Budget that remains unaddressed is on the issue of the viability of the BC network. Here, the government should encourage higher payouts in specific remote locations, where economic activity and population density do not make for a viable BC. And nudge banks towards sharing more products and services through the BC channel. We hope that the data policy mentioned earlier will cover granular information on activity and usage of the network at the last mile.
Do follow our Indicus Centre for Financial Inclusion page on Linkedin to continue the conversation. Read on here for more of the latest news and views on financial inclusion in India, thanks!
Watch the recording of the Plenary discussion moderated by Sumita Kale at the Inclusive Finance India Summit 2022 on “Closing the Gap – As More Get Financially Included” Discussants: Saniya Ansar World Bank, Maya Vengurlekar CRISIL Foundation, Pawan Bakhshi BMGF, Kalpana Ajayan Women’s World Banking and Praveena Rai, NPCI spoke on the gaps in India's quest for universal and meaningful financial inclusion, focusing on the challenges in data and metrics, with suggestions on the way forward.
The Economic Survey 2022-23 released a day before the Budget has copious data in two chapters of interest to this forum – Social Infrastructure and Employment and Physical and Digital Infrastructure.
A report, “Making digital platforms work for women in rural & agricultural livelihoods” from CGAP, Value for Women and ISF Advisors looks at Agtech serving the needs of rural women.
MSC-Enabling inclusion in the digital age collaborated with NITI Aayog Official’s Women Entrepreneurship Platform (WEP) published a report, Decoding government support to women entrepreneurs in India.
Reserve Bank of India (RBI) Development Research Group have a report out on the Determinants of Financial Literacy and Financial Inclusion in North-Eastern Region of India: A Case Study of Mizoram.
CGAP's Rani Deshpande and Antonique Koning looked at the segment of young women for financial inclusion and empowerment and reported results from a study done in four countries - Bangladesh, India, Kenya and Nigeria.
Rahul Rai from BlockTower Capital wrote on how OCEN is democratizing credit access in India.
Jiji Mammen from Sa-Dhan wrote on the key role played by microfinance in financial inclusion.
Rajnish Kumar, Chairman, BharatPe and former Chairman State Bank of India, spoke at the Business Today Banking and Economy Summit on the evolving financial ecosystem.
Howard Miller, Lakshmi Krishnan and Lucciana Alvarez Ruiz Center for Financial Inclusion (CFI) have a paper out: "Green Inclusive Finance: A Framework for Understanding How Financial Services Can Help Low-Income and Vulnerable People Respond to Climate Change."
Cristina Martínez from CGAP explained an innovative pilot where in early 2022, CGAP Sahamati - driving Open Banking with Account Aggregator and India Post Payments Bank (IPPB) decided to partner to create a solution that will ensure every household in India has access to formal lending products.
National Payments Corporation Of India (NPCI) agreed to allow non-resident Indians to use their non-resident bank accounts with international numbers to transact on the Unified Payments Interface.
Thanks for reading Financial Inclusion News and Views! Subscribe for free to receive new posts.