As the past couple of years witnessed a drop in data costs, WhatsApp has successfully replaced the traditional offline messaging service as the primary mode of text communication in India. Leveraging this fact, this messaging platform launched WhatsApp Business – the pilot for a dedicated mobile app exclusively for businesses – in early September 2017.
Since its launch, popular brands in India such as BookMyShow and MakeMyTrip have been using this Facebook-owned WhatsApp business strategy to connect with their target audience. Though there are many apps that cater to business users, a messaging platform like WhatsApp provides a wider scope for a larger number of businesses, be it the local grocery store, professional services, medical institutions and even the government.
- FREE OF COST You read right! WhatsApp Business lets you list your business and contact your customers at absolutely no cost. With a popular messaging app enabling business owners to send service messages for free, this could mean a gradual decrease for the conventional, but costly SMS facility. This WhatsApp business plan also counters the need for SMEs to create a mobile presence by designing smartphone apps, a distinct advantage for young enterprises from a cost and complexity perspective.
- DESCRIPTIVE BUSINESS PROFILES If you own a small business without a website, WhatsApp Business allows you to describe your business in detail, and you can fill in addresses, contact numbers, social media links, etc. that lets your clients know more about the nature of your operations. The app takes verification seriously; a green tick appears against the name of your business when WhatsApp Business has corroborated the details you had provided.
- MULTIPLE MESSAGING OPTIONS This unique feature of customized reply settings on WhatsApp Business ensures that you are customer-ready at all times. The ‘Quick reply’ option lets you set up standard responses to frequently asked questions. To all new leads who get in touch with you, the ‘Greeting message’ can introduce your business and what makes you different. You can also frame a custom ‘Away message’ for communications during off hours or when the small business owners are busy.
- BUSINESS ANALYTICS More communication also means more data, which can be leveraged to understand your customers better. WhatsApp Business offers messaging statistics, a feature that provides metrics on the number of messages that were sent, delivered and read. Using this information, you can analyze the frequency of response from your leads or customers, modify the content of quick replies and experiment on the strategy of communicating with them.
- WHATSAPP WEB SERVICES WhatsApp Business supports its projection via WhatsApp Web, which lets you manage the service through your computer without the mobile app. It provides additional efficiency when interacting with clients and partners, and leaves automation possibilities open as the system grows.
WhatsApp Business in India is present only on the Play Store; so you will need an Android smartphone to use the app. As every WhatsApp account can be linked to unique mobile numbers, you register on this WhatsApp for business by using your official business number or your office landline.
Keep these ready before you set up the WhatsApp Business app, the steps for which are given below:
1. Backup your chat data to cloud storage if you already have a number which is primarily used for business with WhatsApp. Click on Chats>>Chat Backup>>Backup to upload to the cloud.
2. Download the app from the Google Play Store, install it and then launch it by tapping on the new WhatsApp Business icon.
3. Enter your business phone number that will be used to communicate to your customers, and verify it using the SMS (for mobile phones) or ‘call me’ option (for landlines).
4. Restore the previous chat related to the number once verification is complete (from Step 1).
5. Fill the name of your business and from the chat section, tap on the menu button and head to Settings>> Business settings>> Profile. Here, you can fill in all the details that you want to share with your customers.
What’s in it for small businesses?
WhatsApp Business is extended only to small businesses, an exclusivity that budding entrepreneurs can use to their advantage. The WhatsApp for business marketing aims at streamlining and extending the reach of small businesses without making hefty investments in website development, mobile app creation, customer support, and more.
Moreover, it helps notch up the idea of personalized marketing, as you can use the app to share images of products and promotions periodically to your loyal band of customers. The WhatsApp Business app also offers credibility to small businesses – a green tick against the name of your enterprise verifies the genuineness of your services and operations, an aspect that will help a majority of SMEs to reach out to a wider audience.
There are nearly 230 million WhatsApp users in India, and the fact that everyone knows how to use this WhatsApp for business use eliminates the time required to learn the nuances of a mobile application for businesses. Thus, WhatsApp Business is a ground-breaking solution to the communication and marketing needs of small businesses. We expect the introduction of WhatsApp Payments to act as a catalyst for this business with WhatsApp option to implement artificial intelligence, data analytics and voice recognition technology to optimize it into a powerful sales and marketing channel for small businesses.
An eminent panel of experts from International Financial Corporation, Stanford GSB and CreditEase curated a report and highlighted Capital Float as one of the 100 companies in the world facilitating Financial Inclusion. Our co-founder, Gaurav Hinduja spoke with Anju Patwardhan, MD of CreditEase China on Capital Float’s business model, strategic direction and technological breakthroughs. Read the full interview below.
1. What inspired you to start your business?
The fact that India had more than 50 million SMEs with no access to formal credit who, despite contributing a staggering 15% to the country’s GDP with a high market share of 40% towards employment, had an unmet credit demand of $ 400 billion. Traditional lending institutions are limited by the constraints of their conventional underwriting models that restrict financing due to the volatility of this sector. This, in turn, pushed SMEs to the informal sector where the high interest rates charged by moneylenders fettered borrowers to a chronic cycle of debt. Capital Float was established with the objective to bridge this gap in the market with innovative and flexible credit products for SMEs, delivered in an efficient and customer-friendly manner.
2. Who is your target user base and what is your mission for this group?
Capital Float aims to service high potential, under-served, SMEs with an annual business turnover ranging from Rs 10 lakhs to Rs 100 crore. Our mission is to provide a seamless borrowing experience using customized finance products that cater to the specific needs of different SME segments. Here, technology plays a crucial role in reducing turnaround times, implementing paperless processes and pioneering predictive lending.
Also, we drive our products and processes to realize the national objective of financial inclusion. A recent example of this is the introduction of the Proprietor Loans product that facilitates business growth for micro-entrepreneurs in India. The product targets the small retailer segment such as mom-n-pop stores, salons, medical stores, mobile phone retailers, small restaurants, etc. who face challenges in obtaining loans for business expansion from traditional lenders owing to a lack of formal credit history and sufficient collateral. Capital Float is the first company in India to introduce a product that finances this segment. Moreover, we’ve disbursed the quickest SME loan in India, for this loan, in under 90 seconds.
We designed the Proprietor Loan app in collaboration with IndiaStack. This simple loan app enables small retail store owners to apply for a loan ranging from Rs. 25,000 to Rs. 5 lakhs without having to leave their store. Benefited by the merits of a completely paperless process, the applicant has to merely provide their AADHAAR number to apply for the loan. The app fetches the relevant data using the number and underwrites the customer in real time. We disburse funds to the applicant’s account within minutes of the application. We achieve scale by partnering with ecosystem leaders, such as Metro Cash and Carry, PayTM, Amazon Business, Payworld, etc. and serving storeowners operating on these platforms.
3. What is the central “friction” that your company is striving to overcome/mitigate, and what is distinctive about your strategy for enhancing financial capacity your user base?
Predominantly, traditional banks and non-banks have employed a conventional approach to underwriting. They have constantly shied away from utilizing data points from public sources such as social media, and those that are available from the Government in the form of Aadhaar and GST information. Capital Float has designed its credit underwriting with the fundamental understanding that every SME is different. Leveraging data points from partners in each industry sector along with conventional data, our rigorous credit underwriting engine processes loan applications and disburses funds in real time.
In terms of enhancing the financial capacity of SMEs, we lead a partner-driven approach. The company has partnered with ecosystems across various verticals such as e-commerce (Amazon, Flipkart, PayTM, eBay, Alibaba, Amazon, etc.), retailers (Storeking, Metro Cash & Carry), PoS payment enablers (Mswipe, Pine Labs, Bijlipay, ICICI Merchant Services), digital remittances (Wirecard, Payworld, Eko) etc. By taking an ecosystem led approach, we are able to maintain a low OPEX and cater to a wide range of SMEs without increasing our sales headcount.
We have the widest portfolio of working capital finance products, ranging from Merchant Cash Advance (loans against card swipes) and Supply Chain Finance (loans against bills receivables) to Unsecured Business Loans (traditional business instalments loans) and Proprietor Finance. We designed a unique credit solution called ‘Pay Later’. By using this product, borrowers can make multiple drawdowns from a predefined credit capacity. Interest is charged on the utilized amount and not the entire credit capacity, and the balance gets restored upon repayment. ‘Pay Later’ can be used to make supplier payments within 24 hours.
A collaboration of partnerships with industry leaders and niche products ensure that we can expand our outreach to a majority of our target base and enhance their financial capacity.
4. How does your business model balance the objectives of (a) providing benefits to your user base and (b) meeting the financial targets of your investors?
The SME sector in India is restricted by technical as well as functional limitations that inhibit their access to formal sources of finance. Most small enterprises simply cannot afford to expend time for the lengthy processes and immense documentation requirements that are mandatory to avail a loan from banks or traditional NBFCs. Presenting sufficiently valuable collateral for the loan amount they require is another barrier that most SMEs can’t overcome. Capital Float has a completely digital loan application process that eliminates the need for borrowers to be physically present at a lending institution’s premises to apply for a loan. The use of unconventional data points further reduces the need for a multitude of documentation for credit underwriting. All our SME-oriented credit products are unsecured in nature, which facilitates easy access to finance for a previously ineligible majority of business owners.
Customer satisfaction is immensely significant to us, which drives our efforts to ensure that we offer the best-in-class user experience to our borrowers. This is made possible through continuous innovation that enables us to adapt quickly to the ever-increasing demands of our core target base. Apart from these, we are willing to venture into unexplored SME avenues that face a significant credit deficit. We have recently launched credit products such as Proprietor Loans, Franchise Finance and School Loans for niche customer segments that have previously received little financial backing from lending entities in India. Our constant product & process innovation to reach out to new audience ensures that we never fall short in fulfilling the financial expectations and reinforcing the continual faith of our investors.
5. To what extent, if at all, are traditional deposit-taking financial institutions potential collaborators for fulfilling your mission?
Being an upcoming technology driven lender, we view traditional banks and non-banks as collaborators, not competitors. Capital Float operates India’s largest digital co-lending model, wherein we co-lend with banks, NBFCs and others. We currently have several banks and NBFCs such as RBL, IDFC, IFMR and Tata Capital participating on the platform. Loans are presented on the platform and offered on a first-come- first serve basis. We co-lend up to 30% of each loan to ensure that we have our skin-in- the-game and risks are mitigated. This model works emphatically well, as participating entities are able to leverage the strengths of the other. Banks and large NBFCs possess immense balance sheets, which when made available on the platform lowers our cost of capital. Meanwhile, banks are able to meet their priority sector lending targets by lending to SMEs via the platform. Our data-driven assessment and speed of processes, backed by a robust digital infrastructure significantly lowers the cost of acquisition for participating entities.
The co-lending model currently contributes to 40% of our AUM. We expect this figure to reach 50% of our AUM by end of this financial year.
6. Stepping away (perhaps) from your own company’s mission, what do you see as the major regulatory or technological breakthroughs needed to take a major next step forward in building global financial capacity?
Digital lending companies have evolved as disruptors in traditional financial markets, with an estimated one third of consumers worldwide using FinTech services. To sustain the efforts of this upcoming sector and extend their outreach to the majority of their target group, opening public sources of funding is a necessity that requires government intervention. In India, public funding initiatives such as MUDRA and SIDBI refinances institutions that lend to MSMEs, but within regulations of their own. As a result, refinancing support fails to cover the high operating cost of the small-ticket, short duration unsecured loans that are provided by FinTech lending institutions.
Creating a sustainable digital infrastructure that facilitates easy transfer and recovery of finance offered by FinTech lenders is the need of the hour. This, when implemented via eNACH, will help the digital ecosystem in achieving faster adoption.
Also, enhanced access to government data is yet another factor that will be a game changer for building global financial capacity. With the introduction of a new indirect taxation regime in the form of GST, India has acquired a verified database of tax compliant businesses that offers significant information to determine the credit worthiness of business loan applicants. If this data can be shared with FinTech lenders and credit rating agencies through a secure API, this will result in increasing lending opportunities to myriad SMEs across the country.
Thriving amidst difficult environments has never been easy for SMEs in India, but they continue to stand tall. Despite numerous challenges in the form of infrastructural constraints and lack of access to formal credit, they contribute to 8% of the GDP. Rightly called ‘the engine of growth’ for India, SMEs have scaled manufacturing capabilities, reduced regional disparities and balanced the distribution of wealth.
Small businesses are now being increasingly associated with innovation and employment, and the figures state likewise. The micro, small and medium enterprise(MSME) sector contributes to 69% of employment in India. With the growing penetration of technology into mainstream ecosystem, these industries are at the forefront of bringing the convenience of digitalization to the masses.
The Indian economy is expected to be a $5 trillion economy by 2025, and SMEs are cutting roads towards this goal. As we enter the first financial year post implementation of GST, some interesting small business trends are touted to play an important role for a smoother growth journey to global standards.
Here are the latest business trends that you can keep in mind while setting your objectives for FY 2018-19.
Business Trend 1: Rise of Online B2B Marketplaces
E-commerce marketplaces are gradually gaining momentum worldwide, and has branched out to B2B trading platforms. While this is still at an embryonic stage in India, there is no doubt that the potential it holds is huge. According to experts, the scope of the ecommerce B2B industry is six times bigger than the B2C industry, and is estimated to be worth $620 billion industry by 2020.
Companies such as Amazon Business, Alibaba, IndiaMart, Power2SME, etc. are popular online platforms that connect B2B buyers and suppliers to fulfill their business requirements. These digital platforms have helped small businesses surpass technical and geographical limitations to procure raw materials in bulk at reduced prices and also become official supply partners to large corporations. This is one of the hottest small business trends of 2018 that will present aspiring as well as budding entrepreneurs a level playing field with industry leaders.
Business Trend 2: Personalized Customer Outreach via Automated Tech
With the oldest of the millennials attaining 35 years of age this year, the target audience has shifted by a generation. For an age bracket that has been wrought in technology, this band of consumers need more than online communication. They seek a personalized line of contact when availing services from small businesses, with 60% of them choosing emails as a preferred way to establish this connect.
Since the millennial generation has the highest buying power in the market valued at $44 billion globally, this is one audience you don’t want to miss out on. You can target them by leveraging interactive videos, engaging images, and emails customized with these elements for varying demographics. The use of intelligent virtual communication applications will help you implement this in an efficient and cost-effective manner.
Business Trend 3: Easy Access to Business Credit with FinTech Lenders
The biggest hurdle for small business owners has always been financing. For a country with 50 million SMEs, there is an unmet credit deficit of a staggering $350 billion. Traditional lending institutions are limited by conventional underwriting that caters only to a certain strata of businesses. Lack of collateral, documentation and operational history have been crippling factors that prevented SMEs from qualifying for formal finance. This, in turn, pushed SMEs to the informal sector where the high interest rates charged by moneylenders fettered borrowers to a chronic cycle of debt.
But, FinTech lenders are shifting the narrative by leveraging technology and unconventional data points to provide affordable loans to small businesses as well as consumers. With customized credit products and zero collateral requirement, these digital financiers bridge the gap that had long existed in the market.
Business Trend 4: Big Data to Drive Operations and Decisions
‘Is Big Data too big for SMEs?’- is a question that requires intensive analysis, depending on the goals that define the small business and its operations. Many SMEs see big data projects as unapproachable and sophisticated, owing to the difficulties inherent in understanding huge datasets. However, studies reveal that a calculated use of big data has a colossal impact on the growth of small businesses and has been the chassis for many popular business models.
This business trend is expected to revolutionize the SME sector by speeding its pace of development. New-age digital lenders do finance technological incorporations if it shows a direct correlation to business growth, so you needn’t worry about the funds for investing in Big Data. Check out Unsecured Business Loans for more details.
Business Trend 5: Shifted Focus on IT Security
2017 saw one of the largest cyberattack worldwide, the WannaCry ransomware attack, that caused the encryption of data on computers running the Microsoft Windows operating system and risked the exposure of sensitive data of companies in over 150 countries. Though the attack was stopped within a few days of discovery, the total damages were estimated to be in billions of dollars.
The IT industry in India contributes to a key part of the country’s economy, a significant number of enterprises will begin to invest in dedicated security systems that focus on detection and response, a shift away from conventional systems that were based on prevention. Security enhancements offered by SaaS/Cloud based platforms have become more affordable for small businesses to establish a dominant architecture for data integrity management.
Time is money. No phrase proves this statement better than when you own a growing business.
As you strive to achieve your business aspirations, juggling responsibilities and managing activities end-to-end sums up a typical work day. You simply cannot afford to compromise on any of the processes at hand, because it might have a profound impact on the growth of your venture. The trick is to focus your productivity on the limited resources you have in a time-efficient manner till you can confidently handover the heavy lifting to experts. Successful businessmen will tell you the same, but in two words: time management.
Here are our favorite tried-and-tested time management tips for small business owners to save you time and make running your business easier.1. Fix a Schedule and Stick to it
The best way to accomplish a productive day is to show up at work with a clearly defined set of goals and tasks, preferably hand-written. A disorganized schedule leads to ineptness and wasted hours, eventually leading to a loss of focus on business objectives. Account for every hour of the day, from the time needed for meetings and document review to travel and shopping. Create your schedule with three categories- one for the responsibilities that need to be completed that day, another for those activities that require your attention but can be put on hold and a third with minor tasks that you can work on if you have extra time. Know your downtime- you can use this for short breaks.2. Focus on ONE Task at a Time
Multitasking might seem like a clever way to do many things within a short amount of time, but it divides your attention among the responsibilities at hand. Being a budding enterprise, this is not a risk that you want to take now. Instead, you can try the ‘Pomodoro technique’. This involves setting your timer for a specified time and focusing wholly on one task before the timer goes off. Repeat this after taking short breaks of 5 minutes between tasks. An efficient way to structure your time, this technique ensures that you devote time for a specific activity regularly.3. Delegate Work
All small businesses are a one-man army early into their business operations. But your growth journey to becoming a larger enterprise begins when you start delegating responsibilities to expert personnel. Hire people who are dependable to manage tasks you don’t have time for or you are not suitably skilled for. This will give you more time to work on things that you are best at and need your personal attention. Keeping in mind that most growing enterprises might not be sufficiently funded to hire the right people, Capital Float offers Unsecured Business Loans to support the recruitment needs of these businesses.4. Avoid Distractions
Any means of distraction is harmful for the growth of your business, as the work you do is very different compared to those of your employees. If you think your team members are wasting time on social media, set up a URL blocker on your system. You can forward calls, set up caps on answering emails or designate others to perform repeated tasks, if these are causing you to deviate from your daily schedule.
As you get busier, more people demand your time. Reducing distractions implies training the people around you to respect your time. Your employees tend to consume your time with constant problems or through attempts to garner your attention. Take steps to identify the major time-wasters and keep them at bay.5. Prioritize difficult tasks
An effective time management hack is to start your work hours with the most challenging task at hand. Despite varying individual notions of productivity, mornings are accepted as the time of the day when you are at your optimum performance levels. This leaves the rest of the day to handle repercussions or developments, and you can work on other priorities with a relaxed frame of mind.6. Watch out for ‘Shiny Objects’
Many a small business that has just entered the economic space face the ‘shiny object syndrome’ early into their growth phase. Shiny objects, or seemingly bright opportunities, keeping popping up from time to time and they tend to distract you from your business objectives. You can eliminate such time-wasters by asking for agendas before attending any business proposition and comparing new prospects with the value of opportunities at hand.7. Organize your Work Space
There is no bigger demotivating factor than coming to a cluttered workspace every morning. Not only does it create an unorganized mental space, but according to recent surveys, makes you stay at office longer. Documents categorized into inbound and outbound piles, color-coded filing cabinets, scanning forms onto Outlook, and similar techniques will save you the trouble of rifling through scores of paperwork to find information.8. Evaluate and Improvise Consistently
The worst thing to do to your business is to continue implementing processes that do not benefit your cause. Most small business owners might be busy with specific projects to spend time analyzing their business models. This is where a quarterly evaluation becomes the most significant of time management tips and strategies. A quarter, or three months, is relevantly sufficient amount of time required to determine the effectiveness of a strategy or a business relationship. Carrying out evaluations at the end of every quarter gives ambitious entrepreneurs better process insights and a chance to move in the right direction.9. Measure Big Successes & Failures
One of the critical time management skills that a small business owner must possess is goal setting. Define scalable weekly business goals with an emphasis on a particular aspect of your business that you want to focus on, and evaluate the big wins and losses at the end of the week. What makes this strategy so productive is that here, failures are treated as important as successes, as early analysis saves the time that your team might have continued working on them.10. Leverage Technology
Most small business owners spend more time running a business than growing it. Tasks like staff rotas, invoicing, payroll and tax consume more than 30 hours of productive time every month. With the infinite number of apps and services available online, technology can be used to fill the gap in your current business processes. Automating repetitive tasks such as these will help you save a lot of time to focus on activities that directly impact the growth of your business.
The 25th GST Council was held on 18 January 2018, and the rates of 29 goods and 53 services were reduced to lower tax slabs. These revised rates came into effect on 25 January. Other highlights of the panel included the decision to divide between the Centre and State, collections worth ₹35,000 crores from the Integrated Goods and Services Tax. The proposal to bring petroleum and diesel products under the ambit of GST is likely to be considered in the next meeting.
Here are the key goods and services that have been lowered or raised into new GST slabs.
|Good/Service||Present GST Rates||Revised GST Rates|
|Diamonds & precious stones||3%||0.25%|
|Articles of straw, esparto or other plaiting materials, Velvet fabric||12%||5%|
|LPG supplied to household domestic consumers, Raw materials and consumables needed for launch vehicles, satellites and payloads, Tamarind kernel powder, Mehendi paste in cones, Tailoring services, Transportation of petroleum crude and petroleum products, job-work services for manufacture of leather goods and footwear||18%||5%|
|Sugar boiled confectionery, Drinking water packed in 20 litre bottles, Biodiesel, Drip irrigation system including laterals & sprinklers, Mechanical sprayer, Fertilizer grade Phosphoric acid, Bamboo wood building joinery, Transportation of petroleum crude and petroleum products with ITC credit, Metro and monorail projects, Common effluent treatment plants services for treatment of effluents, Mining or exploration services of petroleum crude and natural gas and for drilling services in respect of the said goods||18%||12%|
|Old and used motor vehicles(other than medium & large cars and SUVs) with a condition than no ITC is availed||28%||12%|
|Old and used motor vehicles [medium and large cars and SUVs] with a condition that No ITC is availed, Public transport buses that run on biofuel, Services by way of admission to theme parks, water parks, joy rides, merry-go-rounds, go-karting and ballet||28%||18%|
|Small housekeeping service providers, notified under section 9 (5) of GST Act, who provide housekeeping service through ECO, without availing ITC||nil||5%|
|Actionable claim in the form of chance to win in betting and gambling including horse racing||nil||28%|
|Rice bran(other than de-oiled rice bran)||0%||5%|
|Cigarette filter rods||12%||18%|
The Finance Minister, Arun Jaitley, announced the Union Budget 2018 on 1st February 2018 with components possessing the potential to have a transformational influence on various sectors of the economy. The current Indian economy has reached US$ 2.5 Trillion and is on its way to becoming the 5th largest in the world. GDP is projected at 7.4 % while the number of taxpayers has increased from 6.47 crores to 8.27 crores and a direct tax revenue growth rate of 18.7% has been achieved as of January 15th. The Union Budget is poised to leverage this upward trajectory and provide the impetus for further development at a macro and micro level. Many of the provisions in the Budget directly impact the daily life of a common man. This blog intends to dwell upon these provisions.
Health, Housing and Employment Receives a Major Boost
NHPS (National Health Protection Scheme) dubbed as the world’s largest government-funded healthcare program will be extended to provide up to ₹5 lakh towards hospitalisation for 10 crore families and ultimately 50 crore actual beneficiaries from underprivileged backgrounds.
Affordable Housing Fund (AHF) has been announced to ensure housing for all by 2022. Under this program, 51 lakh houses in 2017-18 and 2018-19 each will be constructed in rural areas with 37 lakh houses in urban areas.
₹40,000 crores worth of concessions were announced for senior citizens. The annual exemption limit on interest income from fixed and recurring deposit schemes including small savings instruments has been increased from ₹10,000 to ₹50,000 in addition to increasing the ceiling for Section 80D from ₹30,000 to ₹50,000.
To facilitate employment generation, Government will contribute 12% of wages to EPF for 3 years. The Finance Ministry has also reduced EPF deduction to 8% for women employees thus significantly increasing their take-home salary while maintaining employer contribution at 12%.
A Huge Fillip to Travel and Transportation – Growth and Modernisation
Travel and transportation received a huge fillip across roads, railways and civil aviation. ₹1,48,528 crores have been reserved for boosting railway network capacity and gauge conversion. Over 4000 km will be electrified in addition to redeveloping over 600 major railway stations and progressively equipping all stations and trains with Wi-Fi and CCTV. ₹17,000 crores have also been allotted for augmenting Bangalore’s suburban railway network. The Government will quintuple the number of airports to 124 and connect hitherto unserved 56 airports and 36 heliports under UDAN, the regional connectivity program. Around 9000 km of highways will be completed by the end of FY 2017-18 and over 35,000 km of interior roads will be completed in Phase 1.
Digital India - Integrated Education and Research – Major Focus
Under the massive ₹3,073 crore Digital India Program, over 5 lakh Wi-Fi hotspots will be set up to provide broadband access to 5 crore rural citizens. This opens up an avenue for individuals in rural India to access formal finance from digital lenders via the internet. New centres of excellence in the areas of AI, Big Data, Quantum communication and Internet of Things (IoT) will be established to boost indigenous intellectual capital in these crucial areas. An additional ₹14,500 crores have been earmarked for strengthening telecom infrastructure including BharatNet. To harness emerging technologies, particularly 5G, an indigenous Test Bed at IIT, Chennai will receive ₹135 crores.
The Government has launched a new program RISE (Revitalization of Infrastructure and Systems in Education) funded by a non-banking financing agency HEFA (Higher Education Financing Agency) with ₹1 lakh crore. In higher education, under the Prime Minister’s Research Fellow Scheme, 1000 B.Tech students will be identified and facilitated to complete PhD at India’s prestigious institutes. Up to 24 new medical colleges are to be started and upgrade of several existing colleges was announced to ensure at least one Government College for each state in India. Two new schools of planning and architecture will also be set up in addition to 18 more IIT/NIITs.
On the personal income tax front, there are no new changes in income tax slabs or structure. However, a standard deduction of ₹ 40,000 will be introduced in lieu of transport and medical allowances while a higher allowance will be allowed for disabled individuals. From April 1, 2018, long-term capital gains of more than ₹ 1 Lakh will be taxed at 10% though gains until January 31, 2018, and will be grandfathered. Dividends from equity Mutual Funds will now attract DDT to perhaps discourage investors investing in Equity funds primarily for dividends. In an effort to promote gold as an attractive asset class, the existing Gold Monetisation Scheme (GMS) will be made more investor-friendly and a network of regulated gold exchanges will be set up.
Though the budget was projected as agriculture-oriented and farmer-friendly, it is balanced and well-intentioned. Huge boost to expanding and upgrading transportation infrastructure especially the railways and supporting underprivileged with healthcare, housing and employment are the cornerstones of this Union Budget. Substantial measures in the areas of digital economy and education pave the way towards India becoming an economic superpower.
MSME is an important sector for the Government, as it maintains a relentless focus on increasing GDP and employment. Formalization of MSME businesses is being undertaken on a massive scale after demonetization and the introduction of GST. The core focus of the Union Budget 2018 indicates the Government’s commitment to continue strengthening MSMEs from the base of the sector.
Lending a Hand to MSMEs
With the Union Budget 2018-19 in play, the refinancing policy and eligibility criteria under Micro Units Development and Refinance Agency (MUDRA) program will be reviewed to encourage easier financing of MSMEs by NBFCs. The Government has set a target of ₹3,00,000 crores for loans to be provided under MUDRA in 2018-19. Specific measures to address NPAs of MSMEs were promised to ease the cash flow challenges that they face. The tax burden on MSMEs has been reduced by axing tax rate to 25% for those with revenues of below ₹250 crores. Recapitalization of PSU banks will add an additional ₹5,00,000 crores to the available lending pool this year. A unique Aadhaar-like identity for each enterprise is planned for streamlining business identity. This measure can enable Fintech lenders to process eKYC of enterprises swiftly and offer working capital finance in a matter of minutes. Furthermore, the Finance Minister Arun Jaitley called out Fintech lenders in his speech and emphasised their importance in financing the development of MSMEs in India.
A five-year tax holiday was granted to Farmer Producer Organisations (FPO) with a turnover below ₹100 crores to encourage post-harvest value addition. The Government has also promised a Minimum Support Price (MSP) crop of 1.5 times the production cost to farmers. In addition, several proposed measures related to the farm sector include – funds to develop agricultural markets, improve agricultural logistics, enhance rural connectivity, and distribute Kisan credit cards to farmers in fisheries and animal husbandry sectors. This sets the precedent for these sectors to create a digital footprint, facilitating them to receiving customized finance in the future from digital lenders like Capital Float.
The Finance Minister proposed to extend the tax relaxation period to 150 days to footwear and leather industry to boost the creation of employment at the grassroots level. An additional ₹10,000 crores have been allocated for fisheries, animal husbandry and aquaculture industries. This is expected to aid more micro-segments in being included in the formal financial ecosystem
New Financing Avenues
In a bid to help start-ups and venture capital firms to attract foreign investments in niche areas, the Government will evolve a coherent and integrated policy for ODI (Outward Direct Investment) and hybrid instruments. The basket of eligible FDI instruments will be expanded to include these under certain conditions.
Taking a Position on Crypto Assets
The Government has reiterated that it is illegal to transact using cryptocurrencies, though it does not categorically state that it is illegal to hold these assets. The Government will intensify its efforts to eliminate illicit transactions in cryptocurrencies. It also proposes to explore the use of Blockchain technology to enable more transparent payment mechanisms to boost the digital economy further. These efforts certainly forward the shift of business transactions from being paper-based to paperless, while adding clarity on which methods of digital payment are acceptable and which aren’t.
MSME – Key to India’s Industrial Growth
MSME sector plays a key role in India’s journey towards becoming the 5th largest economy in the world. Several measures to ease cash flow have been proposed which are likely to make lending more readily available to MSMEs. With Fintech lenders leading the charge on the financing front, MSMEs can be expectant to receive timely credit support to actualize their business ambitions and achieve remarkable growth this year. Several micro-segments are also expected to be absorbed into the formal financial system, as Fintech lenders like Capital Float continue to champion for the cause of financial inclusion in India.