India 2024-25 Federal Budget Budget Benefiting Fintech Financiers and MSMEs

Large investments are planned to be made in infrastructure development and the development of industrial parks, and the fintech sector is poised to grow.

The 2024-25 federal budget announced by Finance Minister Nirmala Sitharaman brought a wave of positive changes to the fintech loan industry and MSMEs (micro and small businesses). This budget, which focuses strongly on empowering small and medium-sized enterprises and fostering innovation, introduces several measures that promise to completely change the financial situation for both MSMEs and financiers.

One of the most notable announcements is that the upper limit of low-interest loans under the MUDRA entrepreneur system has been raised from 10 rupees to 20 rupees. This change means supporting a wider range of entrepreneurial ventures and supporting their growth and prosperity.

The introduction of a system that makes it easier to continue bank loans to small and medium-sized enterprises during stressful periods is a lifeline for many small and medium-sized enterprises. Through this initiative, the risk of default is reduced, and the financial stability of small and medium-sized enterprises is ensured.

Lowering the sales threshold for mandatory registration on the Trade Claims Discount System (TReDS) platform from 500 rupees to 250 rupees is a major step forward. Thus, more small and medium-sized enterprises can benefit from invoice discounts, and cash flow management is improved. Fintech platforms that specialize in invoice discounts will find new growth paths, and more companies will be able to manage working capital efficiently.

Realizing an e-commerce export hub using the PPP (public-private partnership) method so that small and medium-sized enterprises and traditional craftsmen can sell their products internationally is a visionary initiative. This development opens up new horizons for small and medium-sized enterprises and makes it possible to enter the global market. By providing seamless settlement solutions, exchange services, and export financing options, fintech companies can facilitate the globalization of small and medium-sized enterprises and play an important role.

The income tax rate has been revised, and taxpayers can save up to 17,500 rupees, and there is a high possibility that disposable income and personal consumption will increase. This will indirectly stimulate economic activity and increase credit demand for individuals and businesses alike. For fintech financial institutions, this is an opportunity to expand their customer base and support more entrepreneurs.

Budgets that focus on skill acquisition, such as upgrades to 1,000 industrial training institutions and internship programs announced as part of the Prime Minister's package, will lead to the creation of a more ready workforce. This will lead to a more dynamic business environment where MSMEs and start-ups benefit from a pool of skilled workers. Ultimately, demand for fintech lending solutions to raise funds necessary for new businesses and business expansion will increase.

The fintech sector is poised to grow as large investments are planned for infrastructure development and the development of industrial parks. It is expected that new business opportunities will be created through such initiatives, and fintech lenders can support business in such projects by providing necessary financial services.

The budget also announced preferential treatment (retail schemes, tax exemptions for exchange-traded funds, etc.) for the International Financial Services Center (IFSC). Furthermore, rationalization and clarification of financial operations is expected by rationalizing capital gains taxation, such as raising short-term transfer gains tax on specific financial assets to 20% and long-term transfer gains taxation on all assets to 12.5%.

The introduction of a credit guarantee system for the manufacturing industry is also an important move. With this system, small and medium-sized enterprises will be able to use term loans to purchase machinery and equipment without collateral or third party guarantees. However, the borrower is required to pay a prepaid guarantee fee and an annual guarantee fee in response to a decrease in the loan balance. These measures are aimed at increasing the productivity and competitiveness of the manufacturing industry, and give fintech financial institutions a new path of growth.

Overall, the 2024-25 budget shows a positive outlook for the fintech lending industry and small to medium businesses. The government's commitment to fiscal consolidation, combined with targeted measures for small and medium enterprise support, skill acquisition support, and infrastructure development, is a solid foundation for sustainable economic growth.