The government announced a wide-arching plan on Wednesday to bolster cashless transactions and digital literacy among the rural and poor with a slew of measures but many were disappointed with no substantial tax breaks.
Finance minister Arun Jaitley’s budget speech made repeated references to the importance of a digital economy for “speed, accountability and transparency”.
“A shift to digital payments has huge benefits for the common man… it has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system,” Jaitley told Parliament.
“India is now on the cusp of a massive digital revolution,” he added – this was one of the 27 times he mentioned the word “digital”.
The government has repeatedly pushed for digital transactions – especially after the junking of Rs 1000 and Rs 500 notes last November – and increase in digital literacy in far-flung areas.
Keeping in line with the move, the finance minister stepped up the allocation of the BharatNet Project by Rs 10,000 crore in 2017-18, which will connect 150,000 gram panchayats with high-speed broadband.
The other thrust area of the budget was BHIM, the Aadhaar-based mobile wallet with 12.5 million downloads that Jaitley hopes would play a critical role in making India cashless. The finance minister announced two new schemes to promote BHIM – a referral bonus scheme for individuals and a cashback scheme for merchants.
He also proposed Aadhaar Pay, a payment system for merchants, especially for those who do not have debit cards, mobile wallets and mobile phones. He added that a mission would be set up with a target of 2,500 crore digital transactions for 2017-18.
Banks, too, will focus on expanding the cashless economy by adding one million new point-of-sale terminals by March 2017, and two million Aadhaar-based PoS by September 2017. These digital transaction machines also got an adequate tax boost from Jaitley.
To complete the digital cycle, Jaitley wanted to facilitate loan disbursement based on digital transaction history, and this is where the Small Industries Development Bank of India (SIDBI) would play an important role. “Government will encourage SIDBI to refinance credit institutions which provide unsecured loans at reasonable interest rates to borrowers based on their transaction history,” he said.
The government will review the Payments and Settlement Act and make amendments to institute a Payments Regulatory Board under The Reserve Bank of India, he said. The amendments are proposed in the Finance Bill 2017. Mobile wallet entrepreneurs say the move would go a long way in promoting the ambitions of non-banking payment firms, as the board is likely to have equal representation from banks and mobile-wallet companies.
A digital economy has been the stated ambition of the Modi-government, and expectations were running high in the digital ecosystem of tax sops for the digital ecosystem. But Jaitley left this sector wanting with little announcement of any relief.
While small merchants expected tax breaks for adopting digital transactions, wallet companies sought government support at a time many of them are reeling under heavy losses.