This will be first time that we can see entire nation’s priority projects in one platform.
The Budget clearly lays out the direction that digital and tech will be pivotal to India’s story. Yet, its role in the core areas of health, education and skilling is where India has to still take huge strides. Data centers being classified as infrastructure is an acknowledgement of the digital being as critical as the physical infrastructure.
On the same lines the push towards fiber in the villages is a step in taking this infrastructure to the large, underserved population, in terms of both physical and digital infrastructure. 5G auctions in 2022 and enabling PLI for 5G equipment is another push to the digital economy, though we will have to see how the telcos manage the capital challenge that will be posed by 5G auctions and roll out.
Extending tax holidays to startups is positive, though 1 year does sound incremental, given the opportunity and the impact from that space. However, the taxation of digital asset is a double edged in nature. At one level it brings some formality to the asset class, but on the other hand the taxation levels do make it less attractive and could impact the innovation cycles there. Overall, the budget does underline the push towards a digital economy and its role as a key lever for India’s transformation. An exclusive by the Boston Consulting Group.
[box type=”shadow” align=”” class=”” width=””]Digital Technology and Data
Rajiv Gupta, Managing Director & Senior Partner
To build the backbone of a digital education ecosystem, government of India is developing a National Digital Education Architecture (NDEAR) as a blueprint of a federated but an inter-operable digital infrastructure with a Digital-First approach. This will support not only digital teaching and learning activities but also digital management of educational planning, governance, and administrative activities of the education departments across the country.
The government is trying to bridge this gap between the skilled workforce and the potential employers through a digital platform that leverages AI. Digitally enabled solutions for Health ID issuance, Healthcare Professionals Registry (HPR), Health Facility Registry (HFR) and Health Records (PHR) to support the integrated digital health infrastructure are also under development. Lastly, liberalized use of drones will enable managing and monitoring of large capital-intensive infrastructure projects in EPC and Infrastructure Finance sector.
Saurabh Chandra, Managing Director, BCG Platinion
This union budget has many important growth-oriented decisions. Five major highlights, that captured my attention, are around ease of doing business, more impetus on financial inclusion, special focus on MSME & start up, infrastructure expansion, Technology and R&D investments across sectors including electric vehicles & sustainable energy focus.
- Ease of doing business: With 75,000 compliances getting eliminated and 1486 union laws repealed, this attracts businesses from the world showing India’s intent towards their growth. Also, voluntary exit for corporates cut down from 2 years to 6 months, is a welcome move where entrepreneurship is encouraged.
- More impetus on Financial Inclusion: 100% of 1.5 lakhs post offices to come on core banking system, mobile banking, ATM’s and ensuring online transfer of funds between post office accounts and bank accounts is a welcome move enabling financial inclusion across states and not just metros. Rupees 1 Lakh crore financial assistance to states to catalyze investments is a welcome move.
- Special focus on MSME & startups: Rs 6000 crore programme to rate MSME to be rolled out in next 5 years, a fund with blended capital raised under co-investment model through NABARD to finance startups in agriculture & rural sectors is an extremely appreciated move. To further strengthen start up community, expert committee to be set up to attract investments will give much required impetus to countries entrepreneurship dreams.
- Infrastructure expansion: Capex target expanded by 35.4%, national highway network to be expanded by 25,000 Km, PM Gati Shakti programme and masterplan announcement, focus on public investment to modernise infrastructure leveraging technology is much needed impetus to economic growth.
- Technology and R&D investments, EV & sustainable energy: In all sectors, there’s technology initiatives such as e-passport rollout announcement in travel, Indigenous technology KAWACH to be devised in railways, defense R&D opened up for industry, start up and academia, 5G roll out announcement, an open platform for national digital health ecosystem, national tele mental health program for mental health counselling, Digital Rupee by RBI using blockchain technology to be explored, 75 digital banks in 75 districts to be set up by commercial banks, PM eVidya to be expanded, battery swapping policy and to create sustainable and innovative business models for battery and energy in EV sector, digital ecosystem for reskilling, reduce carbon footprints using technology – are welcome move by Indian government.
Abhik Chatterjee, Managing Director
I am glad that the 2022 Union Budget has outlined concrete steps to develop India’s “bold digital muscle”.
- A pervasive push on “data-powered-Bharat” from Digital Rupee (Blockchain led RBI Operations platform), Unified Logistics Information Platform (GatiShakti), Desh Stack portal for skills and furthering Digital Health Ecosystem, all through open-source and interoperable platforms.
- Deepening Industry-Academia-Startup collaboration in focused sectors i.e. Agri through PPP for AgriTech and Kisan drones, MSME Ramp-up program for skill building and push on Tech for increased financial inclusion.
- Scaling the 2021 fund-boom by providing a boost to PE/VCs in committing 20% govt funding and polices to scale impact on Innovation, DeepTech and Startups.[/box]
Sushma Vasudevan, Managing Director & Partner
The importance of technology in Agriculture and the need for private participation to provide a thrust to this has been acknowledged in the Union Budget 2022. Drones for Kissan, fund with blended capital under NABARD to finance start-ups and a scheme in PPP mode to be introduced for delivery of digital and hi-tech services to farmers are all initiatives that should help enable the above.
[box type=”shadow” align=”” class=”” width=””]Manufacturing
Sumit Gupta, Managing Director and Partner
The Union Budget 2022 is a good balanced budget with focus on increased digital push across multiple sectors. The increase of 35.4% in direct capital expenditure will be pivotal for a sharp economic recovery. The 2-year extension to the period of incorporation for newly incorporated manufacturing units is a welcome move and should give the required boost to the manufacturing sector. The construction of over 80 lakh affordable houses and enhanced focus on Tier 2 and Tier 3 cites will provide a strong impetus to the real estate sector. [/box]
[box type=”shadow” align=”” class=”” width=””]Housing
Neetu Vasanta, Managing Director & Partner
Housing for All is essential for inclusive development. The substantial allocation (INR 40,000 cr) made to develop 80 lakh housing units for beneficiaries under PMAY is a significant step towards it. However, to achieve the set target it is important to monitor timely execution. While the budget has touched upon the need to reduce land and construction approval timelines and maintain affordability, concrete steps to achieve this are still awaited. [/box]
Suresh Subudhi, Managing Director and Senior Partner, BCG & Yashi Tandon, Senior Knowledge Analyst, BCG
Budget 2022-23 increased the infrastructure outlay by almost 50% YoY, giving a strong impetus to increase economic activity through development works. Clear focus on Gati Shakti, Inclusive Development, and Sustainability as next phase of India’s growth.
Concrete steps have been outlined under Gati Shakti that would be driven by six transport ministries and the logistics department to ensure seamless multi-modal connectivity. Emphasis on multi-modal parks, setting up 100 Gati Shakti terminals, and expanding highway network by 25000 km among others will go a long way in improving India’s logistics efficiency. It is also heartening to see plans to integrate state infrastructure projects as part of the Gati Shakti Master Plan. This will be the first time that we can see entire nation’s priority projects in one platform.
Further, as part of inclusive development, the budget focused on pushing Housing for All, putting spotlight on Tier 2 and Tier 3 cities. Initiative to set up a high-powered committee to review the urban planning regime and establishing centers for excellence in this sphere would help in ensuring coherent and holistic development in urban areas
Lastly, the budget takes a strong stand in favor of sustainable development. Issuance of sovereign green bonds to mobilize resources for green infrastructure and reduce carbon intensity are likely to provide the required impetus towards resilience and sustainability
Vishal Mehta, Managing Director & Partner
It is energizing to see the focus on climate competitiveness in the Budget. We think meaningful direction has been provided to improve India’s competitiveness in a carbon challenged world, and also take advantage of this transition to increase our energy self-reliance.
[box type=”shadow” align=”” class=”” width=””]Technology, Media and Telecommunications
Vikash Jain, Managing Director & Senior Partner
The Budget clearly lays out the direction that digital and tech will be pivotal to India’s story. Its role in the core areas of health and education / skilling where India has to still take huge strides. Data centers being classified as infrastructure is an acknowledgement of the digital being as critical as the physical infrastructure. On the same lines the push towards fiber in the villages is a step in taking this infrastructure to the large, underserved population, in terms of both physical and digital infrastructure. 5G auctions in 2022 and enabling PLI for 5G equipment is another push to the digital economy, though we will have to see how the telcos manage the capital challenge that will be posed by 5G auctions and roll out. Extending tax holidays to startups is positive, though 1 year does sound incremental, given the opportunity and the impact from that space. However, the taxation of digital assets is double-edged in nature. At one level it brings some formality to the asset class, but on the other hand the taxation levels do make it less attractive and could impact the innovation cycles there. Overall, the budget does underline the push towards a digital economy and its role as a key lever for India’s transformation[/box]
[box type=”shadow” align=”” class=”” width=””]Fintech
Yashraj Erande, Managing Director and Partner
Launch of digital rupee will be a meta-addition to the India stack. We must get this right as a nation. Crucial to think very strategically about the digital rupee. Two big questions. One, as the major exporter of technology (potentially digital assets) and destination for capital in tech, can India position digital rupee as the reserve currency of the technology and digital trade (in and out flow)? Two, can digital rupee be so programmable, smart and efficient that India sets the global standards on digital currency just like it has done with UPI and Aadhaar.” [/box]