As the countdown begins for the Union Budget 2024, set to be presented by Finance Minister Nirmala Sitharaman on July 23, the anticipation among various stakeholders is palpable. Industry leaders, economists, and policymakers are voicing their expectations, with a strong focus on fiscal policies, economic reforms, and sector-specific impacts.
Income Tax Relief for the Middle Class
One of the most eagerly awaited aspects of this budget is the potential relief for the salaried middle class. After facing dissatisfaction in previous elections, there is widespread speculation that the Modi 3.0 Cabinet will aim to regain the support of this crucial demographic by offering significant income tax relief.
Public Capital Projects and Social Programs
Given the Reserve Bank of India’s (RBI) windfall dividend distribution, there are expectations that the Finance Minister may allocate substantial funds for public capital projects and social programs. This would not only cater to the needs of coalition partners but also support the overall economic development.
Also read: Interim Budget 2024-25 Unveiled – Emphasis on Inclusive Development & Economic Reforms
The Finance Industry Development Council (FIDC) has suggested the establishment of a special refinancing body akin to the National Housing Bank (NHB) for housing finance companies. This could provide a much-needed boost to the sector, which has seen stringent regulatory actions from the RBI.
Despite regulatory challenges, the NBFC sector remains robust with a Capital to Risk-Weighted Assets Ratio (CRAR) of 26.6%, Gross Non-Performing Assets (GNPA) ratio of 4.0%, and Return on Assets (RoA) of 3.3% as of March 2024. Enhanced financial inclusion and digitalization are seen as critical to sustaining this growth.
Check what industry leaders think about the upcoming budget;
Prashant Kumar, MD & CEO, YES BANK, stated, “The Union Budget 2024 is expected to play a crucial role in shaping India’s economic future. This is especially as the tax revenue collections have remained robust and the government is also armed with a bumper dividend from the RBI. The government is expected to remain committed to the reforms process and be focused on eight key areas: sustainable growth, financial sector, infrastructure and investment, women, youth & farmers, last-mile connectivity, inclusive development, and economic expansion – all essential towards achieving ‘Viksit Bharat’ by 2047.”
“The government has exhibited its commitment towards fiscal discipline, much necessary to signal economic stability and build investor confidence. However, the government is also expected to balance this objective together with the needs for economic growth and providing adequate outlays for key social sector programs, in an effort towards inclusive growth and ensure that the benefits of economic development reach all segments of society. In this context the government is likely to lay stress on ensuring skill developments, focus on enhancing the strength of the manufacturing sector via sharpening the PLI scheme and provide adequate support for small business to grow”, he added.
“At YES BANK, we are prepared to support the government’s push for enhancing digital infrastructure and promoting financial inclusion. This aligns with our commitment to bringing advanced banking services to underserved regions and supporting initiatives in green mobility, affordable housing, healthcare, and education. These efforts will not only spur economic growth but also ensure holistic development. We are particularly excited about growth in manufacturing and support for MSMEs, which are vital for job creation and economic dynamism. YES BANK stands ready to contribute to India’s journey towards becoming one of the world’s largest economies”, he concluded.
Mahesh Ramamoorthy, Chief Information Officer, YES BANK, said “As we look forward to the Union Budget 2024, enhancing our technology infrastructure and fostering innovation remains crucial. The government’s groundwork with initiatives like the JAM Trinity and investments in digital infrastructure is commendable. Building on this, further support for technologies such as AI, blockchain, and IoT will be vital for driving digital transformation and improving efficiency. Establishing a continuum of cybersecurity measures is essential to improving an organisation security posture. Investments in advanced threat intelligence and robust encryption will protect our digital assets and build user trust. Additionally, improving data privacy and governance will ensure compliance with global standards and safeguard user information.”
“Promoting a culture of continuous learning and innovation is key to attracting and retaining top tech talent. The government can facilitate this by providing policy support, funding for technology initiatives, and creating an enabling environment for innovation. The private sector, including institutions like YES BANK, can then provide access to advanced tools and reskilling programmes to drive sustained growth and innovation. At YES BANK, we are committed to leveraging these advancements to support our customers and drive economic growth. We look forward to the government’s continued support in these critical areas to achieve a technologically advanced and sustainable future for India,” he added further.
Niranjan Banodkar, Group CFO and Head Sustainable Finance, YES BANK, mentioned that, “As we look ahead to the Union Budget 2024, an emphasis on green financing and sustainability is crucial for achieving India’s climate goals and for driving sustainable growth. The interim Budget 2024 already demonstrated the government’s commitment and renewed impetus towards sustainable development, with enhanced allocations towards rooftop solarization, the National Green Hydrogen Scheme, and Blue Economy 2.0, along with a new scheme for bio-manufacturing. Sustained budgetary allocations for climate mitigation and adaptation, focus on digital public infrastructure and enhanced support for promoting indigenous manufacturing is crucial to provide the necessary economic stimulus to maintain India’s green growth momentum and achieve its net zero by 2070 target.”
“As India awaits the Union Budget 2024, the auto finance NBFCs — particularly those focused on the commercial vehicle segment — remain optimistic about receiving sustained, rather incremental budgetary allocations towards govt. public infrastructure Capex, which can consequently channel the correlational demand for Commercial Vehicles. Moreover, favourable policy interventions by the government and regulatory reliefs can empower NBFCs to further leverage their tech advancements and capabilities to better serve the unbanked and underserved populations, addressing their entrepreneurial aspirations. Additionally, targeted policies aimed at lowering costs and making commercial vehicles more affordable will play an integral role in building a strong and resilient transport-logistics ecosystem, thereby promoting comprehensive multimodal development”, shared Anand Bang, Chief Operating Officer – Sales & Marketing, Tata Motors Finance
Shaji Varghese, CEO of Muthoot Fincorp Limited, stated, “We hope to see new initiatives for enhancing access to credit among MSMEs especially in the rural areas in this upcoming budget. More liquidity assistance to NBFCs, and credit guarantee to MSME lending can help enhance supply of credit . We anticipate continued budget allocations towards digital initiatives and technologies. Financial inclusion is a significant enabler for Viksit Bharat 2047 and while NBFCs are focused on the same, we expect the government to take some measures to increase credit supply there by enabling the SMEs and rural business development, thus contributing to nation’s growth.”
Ondrej Kubik, Chief Executive Officer, Home Credit India, stated, “Our optimism is anchored in the expectation that the government will continue to emphasise fiscal prudence. Amidst looming economic uncertainties due to inflationary conditions and geopolitical conflicts, a well-balanced Budget, coupled with judicious fiscal policies, is imperative to sustain the nation’s growth momentum and ensure a robust and sustainable economic future. We foresee significant impacts from government initiatives aimed at strengthening the manufacturing sector and boosting capital expenditure, which will positively influence India’s economic trajectory.”
“From industry point of view, our expectations would be the support from government to take relevant steps towards enhancing liquidity-enhancement measures for NBFCs as cost of funding has always been on a higher-side especially for non-deposit NBFCs. We hope the Budget will continue to provide consumer-friendly and simplified policies, alongside accelerating digital infrastructure and other framework measures, to further the ongoing transformation in the financial sector. Overall, we are optimistic that this Budget will strike the right balance between growth and fiscal responsibility, fostering a robust, inclusive, and technologically advanced economy”, he added.
Vishnu R Dusad, Co-Founder & Managing Director, Nucleus Software stated, “As India approaches the forthcoming budget, there is significant anticipation for policies that will catalyze innovation and progress in the fintech sector. The industry eagerly awaits measures that support responsible innovation in financial services, enhance our digital payment ecosystem, and drive financial inclusion. Increased investment in emerging technologies such as artificial intelligence, data analytics, and cybersecurity is crucial for bolstering India’s position as a leading IT nation.”
He added further, “The fintech community is particularly optimistic about initiatives that encourage research and development and promote financial inclusion, especially in rural and underserved areas. We also recognize the importance of cross-industry collaboration to propel India’s growth. By fostering partnerships between fintech companies, traditional financial institutions, and technology providers, we can leverage diverse expertise and resources to create innovative solutions that address the evolving needs of consumers and businesses alike.”
“In the financial services space, there is a pressing need to boost digital lending through increased investment in technology, which can streamline processes, reduce delays, and make financial services more accessible to all. We look forward to regulatory frameworks that will enhance digital security and efficiency, ensuring a safer and more robust digital payment environment. Together, through collaborative efforts and forward-thinking policies, we can drive India’s fintech sector towards unprecedented growth and global leadership,” he concluded.
Pramod Sharda, CEO of IceWarp India and the Middle East, said, “The upcoming Indian Union Budget 2024 presents a pivotal moment for our economy. We anticipate forward-thinking policies that will foster digital innovation and infrastructure development. As a leading provider of collaborative solutions, IceWarp looks forward to initiatives that support the growth of technology-driven enterprises, streamline regulatory frameworks, and enhance cybersecurity measures. This budget has the potential to propel India towards becoming a global tech hub, and we are optimistic about the opportunities it will create for businesses and individuals alike.”
Navin Saini, Chief Business Officer – Retail & MSME, Arka Fincap, stated that, “I am hopeful that the government will continue its agenda to provide a strong foundation for MSMEs, bolstering their growth. To achieve this, they should consider increasing the loan limits of the Pradhan Mantri MUDRA Yojana (PMMY) scheme from ₹10 lakhs to ₹20 lakhs and expanding the credit guarantee cover for unsecured loans for MSMEs from ₹2 crores to ₹5 crores. These measures will provide MSMEs with greater access to necessary financial resources, enabling them to thrive and contribute significantly to the economy.”
Nirav Choksi, CEO and Co-Founder of CredAble, shares his expectations for the budget’s impact on the industry.
“We believe India’s forthcoming Union Budget will prioritise sustaining growth over the medium term, encouraging capital investments, and achieving fiscal consolidation. India’s journey to become a US$5 trillion economy will be marked by digital advancements, a resilient MSME sector, and a thriving trade ecosystem.”
“Proactive trade agreements coupled with extensions of the concessional corporate tax rate for new manufacturing units are expected to attract investments, unlock new market opportunities, and empower businesses to navigate global challenges. Strategic reforms to address tax challenges, ensure the ease of paying taxes, and improve the overall compliance framework are essential for fostering a conducive business environment for startups in the country.”
“We look forward to measures that support responsible innovation in financial services, foster partnerships, enhance the digital lending ecosystem, and catalyze innovation in the FinTech sector to deepen last-mile financial inclusion. Overall, we are optimistic about transformative reforms like improved credit access, clarity regarding the 45-day payment rule for MSMEs, and lower interest rates, which will in turn enhance the competitiveness of MSMEs on a global scale and significantly contribute to India’s trajectory towards becoming an economic superpower.”
Harshvardhan Lunia, founder & CEO, Lendingkart Group shared his views on the expectations for the upcoming Union Budget 2024, stated, ““The Indian Government’s vision to realise ‘Viksit Bharat 2047’ includes empowering MSMEs for economic growth as they form the bedrock of our economy, and it is imperative to ensure that they are equipped with the right means and empowered with digital literacy. Fintech NBFCs are pivotal in providing easy credit to MSMEs to boost their productivity, economic standing, and innovation. In the upcoming Budget, it is crucial to prioritize funding for these NBFCs and introduce interest rate rebates to ensure subsidized rates for MSMEs. Additionally, reducing credit guarantee registration fees will enable lenders to pass on benefits effectively to small and medium enterprises, further creating an ecosystem where access to capital will become seamless.”
“In digital co-lending, regulated entities can allocate up to 5% for Default Loss Guarantee (DLG). Currently, non-Fintech lenders (NFLIs) shoulder 80% of the loan risk and receive DLG without access to Credit Guarantee Scheme benefits. Allowing NFLIs to register these portfolios would channel credit guarantee recoveries to Fintech NBFCs, thereby bolstering support for MSMEs,” added.
“Moreover, enhancing the frequency of claims under the CGMFU from once to at least twice per year would provide lenders with more frequent access to liquidity support. These measures are critical for fostering a conducive environment for digital lending platforms to sustain and expand their impact on the MSME sector.”
Jitendra Tanwar, Managing Director & CEO of Namdev Finvest Pvt Ltd, mentioned, “The NBFC sector in FY25 faces a complex landscape of challenges and growth prospects, especially in capital mobilization crucial for expanding business operations. This sector plays a pivotal role in addressing the financial inclusion gap by funding over 6 crore MSMEs across the country. Currently, banks and capital markets serve as primary funding sources for NBFCs. While offshore development financial institutions offer sustainable long-term funds aimed at enhancing social aspects such as gender-based financing and promoting inclusive growth in deep rural economies, the disadvantages of offshore borrowing become apparent. These include high withholding taxes and the absence of incentives for NBFCs or authorized dealer banks (AD Banks), making fully hedged borrowings less competitive compared to domestic loans, which benefit from priority sector lending (PSL) advantages.
“Despite these challenges, offshore borrowing presents opportunities for credit diversification and risk management, integrating global best practices into the domestic financial market for the purpose of Micro Enterprises (MSMEs) and retail borrowers of green vehicles and solar rooftop products (renewable products). This approach can potentially strengthen the economy by leveraging partnerships with global institutions committed to sustainable, environment-friendly finance initiatives. In conclusion, while navigating the complexities of offshore versus onshore funding for MSME and green financing, the government must consider incentivizing and promoting such measures so that NBFCs can carefully take advantage of global integration, ensuring sustainable growth and financial inclusion across India’s diverse economic landscape.”
Gaurav Jalan, Founder & CEO, mPokket, said, “Following from the Interim Budget earlier this year and the challenges of the economy in the recent past, the upcoming full budget is expected to focus on employment, infrastructure and innovation. We expect the government to double down on initiatives relating to upskilling of youth to improve employability. Alongside this, increasing jobs is expected to be the core government agenda. We expect this to be through a dual approach of easing credit access to small and medium businesses to catalyse their growth and through incentives on research and investments from the private sector. We expect the government to also focus on the disposable income of the middle class by revisiting direct taxation rates. This shall drive a sustained domestic consumption-led growth for the economy. Additionally, we believe the government shall continue to view positively the contribution of fintechs as a key driver of easy access to credit and their potential to create employment. We therefore expect a favourable approach to investments in the sector and clarity on the open regulatory discussions to propel India towards becoming a global fintech hub.”
Ranjan Kumar, Head – Finance & Accounts, FincFriends said that, “As we look ahead to the upcoming budget, there are high hopes for measures that will boost fintech innovation in banking services, promote digital payments in underserved areas, improve KYC and anti-fraud systems, and support MSME financial inclusion through easier lending processes and tax breaks. Additionally, fostering partnerships with traditional financial institutions for innovative solutions and ensuring financial stability is crucial.”
“For 2024, fintech industry leaders expect significant budget allocations to enhance cybersecurity, improve digital customer experiences, and drive innovation in financial technologies. We anticipate investments in scalable infrastructure, AI-driven solutions, and regulatory compliance frameworks to support sustainable growth and build customer trust in a rapidly changing market environment.”
Prasanth Madavana, Co-founder, Fedo, stated that, “The development of the NDHM is a transformative step towards establishing a robust digital infrastructure that enhances the accessibility and affordability of insurance services. Initiatives like eSanjeevani are pivotal in extending access to medical consultations, thereby supporting the insurance industry by streamlining the claims process and improving service delivery. At Fedo.ai, we’re excited about these advancements and hope for focused attention on them in this budget. We eagerly anticipate contributing to this digital insurance revolution.”
Rakesh Goyal, Managing Director, Probusinsurance, stated, “The Union Finance Budget is around the corner, and like every time, the insurance industry has certain expectations from the government and the finance minister. These are not new topics or new prospects, but the ones that are in long-standing demand from the industry. The first and foremost is the reduction in the Goods and Services Tax (GST) on insurance premiums. Currently, GST on insurance premiums is 18 percent, which is considered high and a deterrent for potential policy buyers. If there is a reduction in GST, it will help the industry in a big way. Secondly, the policyholders should receive higher tax benefits for their medical insurance. We should raise the limit to Rs 50,000 for self, spouse, and children, and Rs 1 lakh for senior citizens. Finally, increase the limits for the Income Tax Act 80C. Right now, Indians get a tax exemption of Rs 1.5 lakh every year, but it’s crowded with various financial products. We would expect the limit to increase or to establish a separate exemption limit specifically for life insurance premiums. This move would help increase countrywide insurance penetration.”
As Nirmala Sitharaman prepares to present the budget in the Lok Sabha during the Monsoon Session starting July 22, all eyes are on how she will balance the diverse expectations. With the potential for significant economic reforms and allocations, the 2024 Union Budget is poised to shape India’s economic landscape in the coming year.
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