How India’s 2017 Union Budget could impact digital payments in the country

Photo credit: Lubomir Mihalik.

The weight of the world rested on the shoulders of India’s finance minister Shri Arun Jaitley as he stepped into the Parliament on February 1, 2017 to unveil the country’s first budget post demonetization.

Demonetization has received worldwide coverage, owing to the enormity of the move and the ramifications. But remonetization has made a difference to the situation in the recent months, with cash being inducted back into the system, easing the pain and discomfort of a cash-dependent population.

Among the many firsts in the Union Budget 2017, policy and budget measures to construct a digital economy stood out as original and groundbreaking measures, especially for a growing economy with tremendous competition for financial resource allocations in poverty alleviation, education, infrastructure development, health, and other sectors.

Here are some interesting and notable firsts:

1. It’s the first time in 92 years that the general budget and the rail budget are presented together
2. Advancement of the budget presentation date
3. First budget after disbanding the planning commission
4. First budget post demonetization and the shock to GDP growth estimates

“There is #BudgetForAll” was the overwhelming headline after the budget presentation. It aligns with the development theme that won Narendra Modi an unprecedented majority in the 2014 general election.

Unlike a 10-point agenda which was more common with previous finance ministers, Jaitley declared a three-point agenda: transform, energize, and clean India.

Based on those three, the 10 main tenets of the budget are the following (the full text of the budget speech is available here):

(I have categorized my analysis in two parts. The first part focuses on non-policy aspects, and the second part will be a concluding segment focusing on policy.)

Now, for a careful examination of each budgetary mention:

Referral bonus scheme for individuals and cashback scheme for merchants via the BHIM app

Aadhaar Pay and nationwide roll-out of Aadhaar-based point of sale terminals

Roll-out of 1 million new POS terminals by March 2017

Encouragement to SIDBI to provide assistance based on loan history

Promoting digital