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Heading into 2022, India is upgrading its digital ecosystem through technology-enabled development plans. India’s Finance Minister Nirmala Sitharaman presented the Union Budget 2022-23 on Tuesday, laying a growth map that focuses on several initiatives on the digital and technological front in key sectors like education, telecom, automotive, healthcare as well as agriculture.
Providing a major boost to the Indian economy, the budget’s big tech push consisted of the launch of its digital currency, the introduction of a digital asset tax, provision of digital skills as well as improvement of digital banking as well as infrastructure needs.
The budget also announced India’s growth estimates of 9.2% for the financial year 2022 starting in April, which would be the highest among all economies. For the following FY23 the government forecasts 6.4% growth.
“Attempting to immunize the economy from the vagaries of the pandemic-led slowdown, the 2022-23 budget focused on right spending of its scant resources on physical and digital infrastructure, to keep up the recovery momentum,” a report from Franklin Templeton Investments commented the budget announcement.
India’s path-breaking digitization initiatives
Joining a handful of nations, India announced the rollout of its own central bank digital currency (CBDC), the Digital Rupee. As per the Budget, the Reserve Bank of India (RBI) will issue the CBDC in the next financial year.
“The introduction of a central bank digital currency will give a big boost to the digital economy. The digital currency will also lead to a more efficient and cheaper currency management system,” Sitharaman said while presenting the federal budget.
Aside from the digital currency, another significant announcement was the recognition of virtual digital assets (VDAs) like cryptocurrencies and non-fungible tokens (NFTs). India announced a 30% tax on any income from the transfer of virtual or digital assets, effectively removing doubts about the legal status of digital transactions.
This is despite the fact that the so-called Crypto Bill – that would provide clarity on the crypto legalities and regulations – has not been tabled in Parliament. As per Sitharaman, the bill is still undergoing consultations.
Considering India’s attempts to ban cryptocurrencies over the years, the Indian government’s warming up to crypto tax was a surprise to many industry experts. According to the CRISIL, India’s largest independent integrated research house, the taxation of digital assets suggests there is no immediate move to do away with them — providing some clarity to investors.
Another move towards tech-enabled development was the issuance of E-passports, which means the passports of Indian citizens will soon be digitized using embedded chips and futuristic tech.
India is also pushing for an e-education future by launching a digital university, that will provide access to world-class quality universal education. Additionally, the budget also announced the launch of an e-portal to empower citizens to skill through online training, called the “Digital Ecosystem for Skilling and Livelihood” (DESH-Stack E-portal). Amid pandemic led closure of educational institutions, India also plans to set up 750 virtual labs in science and mathematics, as well as 75 skilling e-labs by this year.
Digitization across sectors from automotive to solar
Emphasizing on digitization of payments, Budget 2022 further proposed to set up 75 digital banking units in 75 districts. Aside from that, the country also plans to connect all its 0.15 million post offices to the core banking system, enabling interoperability and financial inclusion.
As per the analysts from CRISIL, the government’s continuing focus on digital payments and digital banking will materially enhance financial inclusion in the country, especially in the rural areas, while linking post offices to core banking will deepen penetration.
For the ambitious goal of achieving 280 GW of installed solar capacity by 2030, the budget proposed to enhance the funding under the Production Linked Incentive Scheme (PLI) for high-efficiency domestic solar cells and module manufacturing of $2.6 m from earlier $0.6m.
This could lead to the setting up of 30-35 GW of solar module capacity and 25-30 GW of cell capacity by 2024, according to Hetal Gandhi at CRISIL Research, which will also reduce dependency on imports.
Besides that, to promote the use of electric vehicles (EVs) in the country, the government plans to bring a battery swapping policy. “The private sector will be encouraged to set up sustainable business models for battery or energy service,” said the Finance Minister.
The 2022 Budget also plans to launch a PLI scheme worth $71 m for design-led manufacturing to build a strong ecosystem for 5G and announced to hold spectrum auctions to facilitate the launch of 5G in FY23. The budget further granted infrastructure status to the ‘Data centres and energy storage systems including dense charging infrastructure and grid-scale battery systems.’
The budget also increased spending to $26m from earlier allocated $4m, for the National Digital Health Mission, which consists of the digital registries of health providers and facilities as well as unique health identity in a single system.
With the 2022 budget, India is laying the foundation for the next 100 years, Nilesh Shah, Group President & MD, Kotak Mahindra Asset Management, says.
“The paradigm change seen in the digital push together with the narrative for urban development quite clearly signalled a pro-growth stance.”
