Union Budget 2023

Introduction

The Union Minister of Finance and Corporate Affairs, Nirmala Sitharam, presented the Union Budget 2023-24 in Parliament on Wednesday. The Union budget was the 5th budget of Modi 2.0. Big boosters for taxpayers, railways, job creation and capex were announced. Nirmala Sitharaman also highlighted that the Indian economy is on the right path and headed towards a bright future.

Aim of Union budget 2023:

Opportunities for citizens with a focus on youth.
Growth and job creation.
Strong and stable macroeconomic environment.
Also enable women’s self-help groups to reach the next stage of economic empowerment.
Similarly helping self-help groups with supplying raw materials, marketing products and branding.

Seven priorities of Saptarishi

Image showing the 7 priorities of Saptarishi

Major Highlights

Per capita income has more than doubled to ₹1.97 lakh in 9 years.
The Indian economy has jumped from the 10th to the 5th largest in the world in the past nine years.
According to government estimates, the nominal GDP will grow by 10.5% in 2023-24.
7,400 crore digital payments of ₹126 lakh crore took place through UPI (Unified payments interface) in 2022.
Around 220 crore Covid of 102 crore persons completed.
EPFO (Employees provident fund organization) membership has more than doubled to 27 crores.
11.7 crore household toilets built under Swachh Bharat Mission.
Similarly 47.8 crore PM Jan Dhan bank accounts.
Insurance covers 44.6 crore people under PM Suraksha Bima and PM Jeevan Jyoti Yojana.

Main Tax proposal in the finance bill

There have been changes to the income tax regime. There are now five tax slabs instead of six.
A charitable trust must apply 85% of its income within a year to qualify for income tax exemption.
Online game winnings will be subject to a 30% tax deductible at source.
Capital gains from the sale of residential property can deduct to the extent of the purchase or construction of another residential property. The deduction will capped at Rs 10 crore.
Income from investments in life insurance policies will be taxable if a premium of Rs 5 lakh is paid in any year.
Moreover this extension allows startup companies to deduct up to 100% of their profits if they incorporate within this period and meet other conditions. Hence the end date of the deduction period extend from 31 March 2023 to 31 March 2024.

Direct Taxes

New Income tax slabs under new tax regimes:

An individual with an annual up to three lakhs will have tax exemption.
Individuals with an annual income of 9 lakhs will pay 5% taxes.
The annual income of 15 lacks will fetch Rs.1.5 lakh tax, i.e. 20%.
Tax exemption removed in insurance policies with premiums more than Rs 5 lakh.

Indirect Taxes

A total of Rs 15,29,200 crore is expect to collected in indirect tax in 2023-24. Thus the government estimates it will raise Rs 9,56,600 crore through GST.
The number of basic customs duty rates on goods other than textiles and agriculture reduced to 13 from 21.
Crude, glycerine basic custom duty reduced to 2.5%.
Silver bars import duty hiked to align it with gold and platinum.

What gets cheaper

What gets costlier

Allocation of specific ministries

Image showing fund allocation for specific ministries.

Saving Schemes

In the budget the maximum deposit limit for Senior Citizen Savings Scheme increase to Rs 30 lakh from Rs 15 lakh.
Similarly the Monthly Income Scheme limit double to Rs 9 lakh and Rs 15 lakh for joint accounts.
Mahila Samman Saving Certificate, a one-time new saving scheme for women to be made available for two years up to March 2025.

Sector-wise highlights

1. Banking

Govt makes amendments to Banking Regulation Act to improve governance in banks.

2. Jobs

The government will launch Pradhan Mantri Kaushal Vikas Yojana 4.0 to enable much Indian youth to take up industry-relevant skill training.
Similarly 30 Skill India International Centers will be set up across different States to upskill the youth for international opportunities.

3. Infrastructure & Investments

Creating urban infrastructure in Tier 2 and Tier 3 cities via establishing UIDF.
Increased capital investment outlay by 33.4% to Rs.10 lakh crore.
Continuation of a 50-year interest-free loan to State governments to incentivize infrastructure investment.
Highest ever capital outlay of Rs.2.4 lakh crore for Railways

4. Energy & Environment

Rs 35,000 crores priority capital for the energy transition.
Battery Energy Storage Systems with 4,000 MWh capacity will be supported with viability gap funding.
Companies, individuals, and local bodies will be eligible for a Green Credit Programme under the Environment (Protection) Act of 1986 to encourage and collect resources for environmentally sustainable actions.
For funds to be allocated for replacing old polluted vehicles.
Moreover Setting up 10,000 bio inputs resource centres to facilitate farmers to adopt natural farming.

5. Health

One hundred fifty-seven new nursing colleges are going to establish.
Sickle cell anaemia elimination mission is going to launch covering seven crore people in the age group 0-40 in affected tribal areas.
A new programme to promote research in pharmaceuticals will be launching.

6. Education

National Digital libraries are to be set up for children and adolescents.
States to set up physical libraries at panchayat and ward levels.
Revamped teacher’s training via District Institutes of Education and Training.

7. Agriculture

An Agriculture Accelerator Fund will set up to encourage agri-startups in rural areas.
Also a sub-scheme of PM Matsya Sampada Yojana will launch with an investment of Rs 6,000 crore to support fishermen, fish vendors, and MSMEs.
Decentralized storage capacity will set up for farmers to store their produce.
20 lakh crore agricultural credit targeted at Animal husbandry, Dairy and fisheries sector.

8. Finance

Setting up National Financial Information Register to enable efficient lending, promote financial inclusion and enhance financial stability.
Similarly setting up a Central data processing centre for faster handling of administrative work under the companies act.

9. Urban development

An Urban Infrastructure Development Fund will establish to develop urban infrastructure by public agencies in tier-2 and tier-3 cities.
States and cities will encourage to undertake urban planning reforms such as efficient land use and transit-oriented development.

10. Research And Development (R&D)

Three centres of excellence for R&D in Artificial Intelligence (AI) will establish in select educational institutions.
Surely 100 labs will set up in engineering institutions for developing 5G applications.

11. Sports

Rs 3,397.32 crore is allocated to Sports, an increase of Rs 723.97 crore and the country’s highest-ever sports budget allocation.
Moreover National sports federation (nsfoi) gets a hike of Rs.325 crore.
Sports Authority of India (SAI) receives Rs.785.52 crore.
Also 1,045 crore is allocated to ‘Khelo India’.

12. Space

Department of Space has been allocated Rs.12,544 crore.
Rs 408.69 crore is allocated to Physical Research Laboratory.

Budget Estimates of 2023-24

Total Expenditure: Clearly the government estimate to spend Rs 45,03,097 crore in 2023-24, an increase of 7.5% over the revised estimate of 2022-23.
Revenue Expenditure: Out of the total expenditure, revenue expenditure estimate to be Rs 35,02,136 crore, an increase of 1.2%.
Capital Expenditure: Capital expenditure estimate to be Rs 10,00,961 crore, which is a 37.4% increase. The increase in capital expenditure is due to an increase in capital outlay on transport (including railways, roads and bridges, and inland water transport) by Rs 1,28,863 crore (36.1% increase).
Total receipts: Government receipts (borrowings excluded) are estimated to be Rs 27,16,281 crore, an increase of 11.7% over the revised estimates for 2022-23.
Estimated GDP growth: The nominal GDP will grow at 10.5% in 2023-24.
Transfer to states: The central government will transfer Rs 18,62,874 crore to states and union territories. Thus an increase of 8.9% over the revised estimates for 2022-23.

Check our Year In Review 2022 blog, where we cover all the major events and highlights of the business and tech world in the year 2022.

Understanding Embedded Finance

What is Embedded Finance?

Embedded finance is a fintech sub-sector and the term refers to integration of financial services into non-financial business or services. This integration allows businesses to provide financial services to their customers without them having to leave their platform. For example, every time you pay for your purchased goods or services online without having to leave the app, its the magic of embedded finance. Other examples include digital wallets, payment processing, pay-later, insurance, loans, etc. This became trendy in the last couple of years, as it boomed particularly in 2020.

Embedded Finance Technologies

Embedded Payments

This is a type of payment system that is integrated into the overall functionality of app or website. Embedded Finance allow users to make payments within the application or website without the need to leave and go to a separate payment processing page. Embedded payments were the first financial service to be incorporated into non-financial products. And probably the most well-known type of embedded finance offering. Some of Embedded payments use cases are subscription based services, E-commerce, in-game purchases, crowdfunding campaigns, online marketplaces etc. Google Pay, Amazon Pay and Venmo are few examples of embedded payment applications.

Embedded Buy Now Pay Later Installment Plans

Companies now offer Buy now Pay later services where the consumers can get the product right away and pay for it over time in installments. This installment plan option undergo presentation during mobile checkout. For example, Amazon Pay offers a Pay later option of 3 to 12 interest-free installment plans.

Embedded Lending

Embedded lending is another layer of Buy now Pay later. It refers to the integration of lending functionality into the existing processes and systems of a company through their embedded finance offerings. This type of lending allows companies to offer financing options directly to their customers, without the need for customers to go through a separate lending institution. Consumers don’t need to go to the banks right now to get a loan now. Example: Using Instant Settlements for Marketplace Sellers, marketplace sellers can receive loans based on their sales data which is fetched directly from the marketplace platform utilizing safe and secure APIs in seconds.

Embedded Investing

Embedded investing refers to the integration of investment options directly into a company’s existing products, services, or platforms. The goal of embedded investing is to make it easier and more convenient for customers. This is by enabling them to invest in various financial assets without leaving the platform. Example: Embedded investment firms include programs like Robinhood, Cash App, and Acorns through which selling, buying, and exchanging stocks are all possible without leaving the app or interacting with an investment advisor.

Embedded Insurance

Embedded insurance is integration of insurance products and services directly into a company’s existing platforms. This enables any third-party provider to integrate insurance products into its customers’ purchase journeys seamlessly at a low cost. They are a much better option than the complicated traditional process of buying insurance plans. Here you no longer need to meet an insurance agent to get coverage for an upcoming trip or a new purchase.

Example: Travel or Booking companies have embedded the insurance application process into the checkout experience. Here travelers can purchase it during booking time.

Why Embedded Finance matters?

The market size of embedded finance has grown rapidly in last few years. Many non-financial businesses are offering embedded finance services already. The largest usage of embedded finance today is for payments. It includes the possibility for e-commerce companies to perform payments on their sites without entering bank details.

Stats & Numbers

This finance predicts to become a multi-trillion dollar opportunity. Its market value estimate to be bigger than the current value of all fintech startups and global banks and insurers combined.

The stats shows the estimated market value of embedded finance by 2030. — Source: Simone torrance

Embedded finance have attracted more than 3 billion dollars in funding in 2021. This is 3X the growth compared to 2020. ( according to a research by Dealroom).

Embedded finance stats showing funding it recieved in 2021. — Credit: Dealroom.co

Opportunities by sector:

Following is estimated sector wise opportunity of Embedded Finance Industry by 2030

Image showing sector wise oppurtunity of embedded finance industry by 2023 — Credit: Dealroom.co

Marketplaces are increasingly embedding financial services to seek higher valuation than their peers. Fintech enabled marketplaces receive 6.7X higher valuation compared to the other. Few examples of fintech enabled marketplaces are Airbnb, Uber, Shopify etc.

Players in the embedded finance ecosystem

Following are the few of the major embedded finance companies around the world:

Embedded Finance and Banking as a service (BaaS)

Embedded finance and BaaS have attracted billions of dollars in funding and grew 3x in 2021. Both expect to take the world by storm over the coming years.

What is the difference between Embedded Finance and BaaS?

Embedded Finance and BaaS go hand in hand. Even though each differ in their focus areas, there always seems to be a confusion on how they differ from one another.

Embedded finance is more front-end and focuses on the customer experience. Also it provides financial solutions along with buying other goods or services. Here, financial services and products directly integrate into an existing services or platforms of a business.

BaaS is a model where banks and financial institutions provide banking services and technology to other companies, allowing them to offer financial services to their own customers. BaaS is a bank-like service that have more digital consumption. They typically involves licensing of banking infrastructure, such as payment processing and lending capabilities, to non-bank companies.

Industries that are adopting Embedded Finance techs

Embedded finance is rapidly expanding and supports the growth of non-financial corporations, including consumer goods brands, retailers, travel, tech and software businesses, automakers and insurance firms. They are providing great growth opportunity in lucrative B2C and B2B segment in various sectors including E-commerce, Travel, Healthcare, Education, Pharma, Real Estate and Entertainment.

Retail & E-commerce estimate to have a growth opportunity of $3500 billion dollars, whereas healthcare and education expect to grow up-to $1500 and $500 billion dollars by 2030. Other sectors including real estate, travel, mobility, energy, pharmaceuticals expect to have a total growth opportunity of $1500 billion dollars by 2030.

What is the Future of Embedded Finance? How will it change Fintech?

The future of Embedded finance is bright and the market expect to grow into multi trillion dollars in value by 2030. Moreover popularity of digital platforms, growth of mobile E-commerce, rise of fintech and the sharing economy are the main driving factors of embedded finance.

With the rise of digital transformation and the growing demand for financial services that are convenient, accessible, and integrated into everyday life, embedded finance is well-positioned to meet these needs.

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