How Budget 2022 gives a digital thrust to pandemic-stricken Indian economy

In Budget 2022, FM Nirmala Sitharaman laid an emphasis on digital technologies and start-ups cutting across sectors-from agriculture and education to post offices, banking and more

As the Finance Minister rose in Parliament to deliver the annual budget speech on Tuesday, Lok Sabha Speaker Om Birla said the ‘digital budget’ would be read out from a tablet. The digital theme of the budget cropped up time and again during the speech as FM Nirmala Sitharaman laid emphasis on digital technologies and start-ups cutting across sectors-–from agriculture and education to post offices, banking and more. 

“India is now aiming to evolve into a $5 trillion economy and technology-driven startups are going to play a crucial role in achieving this goal. Towards this end, the government has announced paying special attention to technology enabled development and on companies that help in digitisation as well as optimisation of manual processes,” said Tapan Burman, co-founder and CEO of Mihup, a conversational AI start-up.

Here are the most important takeaways for the digital economy from the Budget:

Push for data infrastructure 

The first of the announcements that touched upon digital was the creation of an application programming interface-based platform for the transportation sector that will integrate data from road operators to cut logistics costs and time. Another important digital push was the recognition of data centres as infrastructure which will ease financing of the sector.

"Infrastructure status given to data centres will provide a huge boost to the fast evolving digital environment of the country. Inclusion of data centres in infrastructure will enhance credit availability in this sphere. We expect that 2500MW of new data centre capacity will be needed by 2026 in India," said Shishir Baijal, Chairman and Managing Director, Knight Frank India. "This announcement will greatly help in achieving this capacity and support India’s ambitions of being a strong data centre player in the region." 

Agri modernisation through technology

The Finance Minister said that ‘Kisan Drones’ will be promoted for crop assessment, digitisation of land records, spraying of insecticides, and nutrients. For the delivery of digital and hi-tech services to farmers, a scheme in PPP mode will be launched.

Further, a fund with blended capital, raised under the co-investment model, will be facilitated through Nabard. This is to finance startups for agriculture & rural enterprise, relevant for farm produce value chain.

"Digitisation is the core essence of the overall budget related to the agricultural and rural sector. The government intends to include the Agro tech industry in PPP which is a big welcoming step and would set the tone for further much-needed initiatives for the farming community. Further, the launch of the digibank, financial literacy and skilling and livelihood will help boost the overall economy of Rural India", said Taranbir Singh , co-founder and CEO agritech start-up Faarms.

Gaming and animation get a fillip

For the first time ever the animation, visual effects, gaming and comic (AVCG) segment found mention in an Union Budget. Finance Minister Nirmala Sitharaman in her budget speech announced that a promotion task force will be set up for the animation, visual effects, gaming and comics as the sector offers immense potential for employment.   

This announcement has sent a wave of cheer among several startups especially in the gaming sector, which have been battling with several state governments on their status as industry.  

"We welcome the budget's focus on promoting startups and giving impetus to the Digital Economy. The taskforce for promoting the AVGC sector will provide the much needed clarity and certainty for the Fantasy Sports and Esports sectors by providing more upskilling and career opportunities for the youth to be a part of India's Sunshine sectors,” said Harsh Jain, CEO and co-founder of Dream11 and Dream Sports. 

Crypto heaves a sigh of relief 

The Budget’s move to tax gains made on crypto transactions by investors at 30 per cent has come as a respite for the country’s crypto startups. This is because there had been a fear that the government could place a ban on virtual assets which is now out of the equation, said founders of start-ups dealing in virtual assets. 

Also, the announcement by Sitharaman that the Reserve Bank of India is going to come out with a digital rupee later this year is an encouraging signal as it will lead to a wider understanding and adoption of virtual assets in the country, according to industry experts.

“A 30 per cent tax on income from virtual digital assets, while high, is a positive step as it legitimises crypto and hints at optimistic sentiment towards further acceptance of crypto and NFTs across stakeholders in the country,” said Avinash Shekhar, CEO of crypto platform ZebPay.

“The government has come a long way in its stance towards crypto from last February to today and we are confident that this will herald a new era of growth and innovation for India in a Web 3.0 world,” he added.

Digital banking and payments focus

In recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country. The government has proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks. Also, the financial support for the digital payment ecosystem (which was Rs 1,500 last year) announced in the previous Budget will continue in 2022-23. 

“Budget 2022 is a reflection of consumers' trust in the digital-first approach to banking and finance. Economic Survey 2022 highlighted that UPI is currently the single most extensive retail payment system by volume, reiterating its wide acceptance. This has contributed immensely towards driving digital transformation in the country,” said Akash Sinha, CEO and co-Founder, Cashfree Payments.

“Additionally, the idea of setting up digital banking units in multiple districts will help in the homogenisation of the financial services in rural and semi-urban geographies,” he added.

Govt enters edtech

Finance Minister Nirmala Sitharaman has proposed to set up a digital university to provide education that will be built on a hub and spoke model. She also said that the 1-Class-1-TV channel will be implemented to provide supplementary education to children to make up for the loss of formal education due to the Covid pandemic.

Byju Raveendran, Founder and CEO of edtech unicorn BYJU'S, said “I have always maintained that the digital learning gap is easier to bridge than the physical learning gap. The plan to connect all villages and their residents with optical fibre by 2025 is a welcome step in this regard. The proposed digital university with a personalised learning experience will make higher education more accessible and equitable."

Digital health attracts attention

An open platform for the National Digital Health Ecosystem to be rolled out. 'National Tele Mental Health Programme' for quality mental health counselling and care services to be launched. A network of 23 tele-mental health centres of excellence will be set up, with NIMHANS being the nodal centre and International Institute of Information Technology-Bangalore (IIITB) providing technology support.

“It is going to be the first time that the patients are going to own their medical data and not the doctors or the hospitals. They will have the authority of tracking or sharing their medical records as and when they find it appropriate. From an empowerment perspective, this is a good step, but it can backfire in instances where the patients refuse to share their medical history as that would impact the delivery of care by the providers in future emergencies,” said Meena Ganesh, MD and chairperson of Portea Medical.

5G auctions to happen this year

The government promised rollout of 5G services, proliferation of broadband services in rural areas and boost to local manufacturing under the productivity linked incentive scheme in the Union Budget. Sitharaman said that 5G spectrum auctions will be conducted in 2022 to facilitate commercial service rollout by private companies in fiscal 2023.

“The impetus towards the rollout of 5G and broadband services in 2022 will catalyze an entrepreneurial culture and expand India’s presence on the global map of technology innovation,” said Bhavin Turakhia, CEO and co-founder of fintech unicorn Zeta.