In continuing with the sentiment to expect big announcements in the Union Budget 2016, India’s Digital Payments Think Tank and Thought Leaders also expected massive policy changes for incentivizing Digital Payments and moving consumers away from cash that did not happen.
As I read through the transcript of the Finance Minsters Budget Speech and decoded the impact for payment players, found 5 reasons that allowed me to give the budget an 8/10 rating.
1. Massive nationwide roll-out of ATMs and micro–ATMs in post offices
The Finance Minister’s comments on installation of ATM/micro-ATMs in post-offices will also have a huge effect on further expanding the reach of formal banking services. As a result of all of these, we can expect higher efficiency as well as large cost savings
Budget Announcement:
To provide better access to financial services, especially in rural areas, we will undertake a massive nationwide rollout of ATMs and Micro ATMs in Post Offices over the next three years
Analysis:
- Expansion in the reach of formal banking services to the rural areas and the lowest strata of society, currently unbanked with need to receive government benefits and subsidies
- Financially empower citizens to have access to their money where they are and when they need it
Impact:
- India Post currently has 600 ATMs have been installed across the country and target is to take this number to 1000 by March 2016 and 10,000 in the next couple of years accompanied by availability of 20,000 micro ATMs in the same period1
- Postal department plays a huge role in disbursing wages to Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) beneficiaries. With reach expansion, beneficiaries will be able to get direct access & financial independence
- Currently, people with accounts in postal department can use the services of the ATM. Once the core banking system upgrades happen, Account holders will be able to operate their accounts from any post office
2. Statuary approval for Aadhar
Budget Announcement:
We will undertake significant reforms, such as the enactment of a law to ensure that all Government benefits are conferred upon persons who deserve it, by giving a statutory backing to the AADHAR platform
Analysis:
- This has to be the biggest highlight of Union Budget 2016 :100 million Indians are already Aadhaar holders and with the government removing the confusion on the legal status, Aadhaar authenticated transactions will now have legal sanction
- Accurate targeting of beneficiaries and disbursement of financial assistance and services to them
Impact:
- JAM (Jan Dhan, Aadhaar, Mobile) acronym has Aadhaar at the center quite literally and any #DigitalIndia initiative targeting JAM customers will benefit from the backing
- Aadhaar is central to Government Schemes to stop leakages in disbursals and provide social security to its poor (nearly 5.6 crore LPG subsidy transactions every month are using the Aadhaar platform with 60% of 16.33 crore beneficiaries under LPG ‘Pahal’ scheme now seeded with Aadhaar)
3. Digital Literacy
Budget Announcement:
We need to derive greater benefit from our demographic advantage. We need to spread digital literacy in rural India. Of the 16.8 crore rural households as many as 12 crore households do not have computers and are 9 unlikely to have digitally literate persons. We have already approved two Schemes to promote digital literacy: National Digital Literacy Mission; and Digital Saksharta Abhiyan (DISHA). We now plan to launch a new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional households within the next 3 years. Details of this scheme will be spelt out separately.
Analysis:
- The Digital Literacy Mission Scheme for rural India will narrow the gap and divide experienced today between Mainstream Connected India and our huge unconnected population
- Further #DigitalIndia Program Objectives
Impact:
- Business opportunities for IT companies to back Digital India Program and provide systems and establish the infrastructure needed
- Promoting Digital Literacy will enable people to take advantage of digitization and boost their financial and employment skills while creating employment opportunities for many.
4. Dis-incentivizing cash payments
Budget Announcement:
I also propose to collect tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs.ten lakh and purchase of goods and services in cash exceeding Rs.two lakh. For compliant tax payers with resources, this levy not only advances collection of tax when the expenditure is incurred, but it provides data to the tax authorities to identify the persons who incur such expenditure, but may be missing from the tax base.
Analysis:
- Much needed move to curb black money movement in the system and disincentivizing cash payments for large ticket items
- This will expand the tax base significantly as the transactions need to be reported to authorities and goods/services providers will become accountable for payment of VAT to the government which is collected from consumers
- Boost for #cashlessIndia with users finding merit and convenience to pay with non-cash methods, legally and without stress
[About the author: Monica Jasuja is a Payments Ninja specializing in Digital Payments Initiatives to further India’s progress as a less cash dependent economy. She is a Product Strategist with work experience in 4 geographies globally and brings knowledge and firsthand experience of designing, developing products with the wow factor. This article expresses her personal views, and not those of any of her employers—past, present or future. Monica is available on Twitter: @jasuja]
Sources
- http://wap.business-standard.com/article/economy-policy/soon-private-bank-s-customers-can-withdraw-money-from-india-post-atms-116030301073_1.html
- http://economictimes.indiatimes.com/news/economy/policy/budget-2016-100-crore-people-to-have-an-aadhaar-number-by-month-end/articleshow/51218096.cms
