Measures for promoting digital economy in Indian government’s 2017-18 budget
The Indian government’s 2017-18 budget, which was released today, included a range of measures supporting the development of a digital economy. In addition, initiatives were announced to leverage ICT in the areas of tax assessment, education and health. INR 90 billion (USD 1 billion) has been allocated for Urban Rejuvenation Mission & Smart Cities Mission.
Promoting digital payments
The government has been promoting digital payments after banning 86% of Indian currency, by value, in November 2016 in a bid to crackdown on black money.
The focus would be on rural and semi-urban areas, where financial inclusion is itself a challenge, through post offices, fair price shops and banking correspondents. The government is targeting a combined total of 25 billion digital transactions for 2017-18 through all digital channels.
The government will launch two new schemes to promote the usage of BHIM (Bharat Interface for Money) app for digital payments, namely the Referral Bonus Scheme for individuals and a Cashback Scheme for merchants. The government might also take steps to promote and possibly mandate petrol pumps, fertilizer depots, municipalities, Block offices, road transport offices, universities, colleges, hospitals and other institutions to have facilities for digital payments, including the BHIM App. A proposal to mandate all Government receipts through digital means, beyond a prescribed limit, is under consideration.
The Government plans to launch Aadhar (a 12 digit unique identity number linked to a citizen’s basic demographic and biometric information) Pay, a merchant version of Aadhar Enabled Payment System (AEPS). This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones.
Banks have targeted to introduce additional 1 million new Point of Sales (PoS) terminals by March 2017. They will be encouraged to introduce 2 million Aadhar-based PoS by September 2017.
Miniaturised POS card reader for m-POS, micro ATM standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners will be exempted from a range of customs and excise duties.
The Financial Inclusion Fund (a fund set up with the National Bank for Agriculture and Rural Development to forward the agenda of financial inclusion of excluded population) will be strengthened to augment resources for taking up these initiatives.
The government will work towards early implementation of the interim recommendations of the Committee of Chief Ministers on digital transactions.
The digital payment infrastructure and grievance handling mechanisms shall be strengthened. The government plans to undertake a comprehensive review of the Payment and Settlement Systems Act, 2007, following the recommendation made by the Committee on Digital Payments constituted by Department of Economic Affairs for structural reforms in the payment ecosystem. As a first step, it is proposed to create a Payments Regulatory Board in the Reserve Bank of India (the central bank for the country), which will replace the existing Board for Regulation and Supervision of Payment and Settlement Systems.
The budget presented incentives along with restrictions to encourage cashless and limit cash transactions. Small and medium tax-payers will be provided tax incentives on non-cash turnover. Charitable trusts will be allowed to accept cash donations only up to INR 2000 (USD 30), down from the current INR 10,000 (USD 148). No transaction above INR 300,000 (USD 4449) would be permitted in cash. The Income Tax Act will be amended. However, details on how cash transactions will be monitored are not available yet.
The budget allocated INR 100 billion (USD 1.5 billion) to the BharatNet Project for 2017-18, targeting high speed broadband connectivity on optical fibre in more than 1,50,000 villages by the end of the year. A DigiGaon (Digital Village) initiative will be launched to provide tele-medicine, education and skills through digital technology.
Health and education
The government plans to introduce Aadhar based Smart Cards for senior citizens,containing their health details. A pilot will be implemented in 15 districts during 2017-18.
The government plans to launch the SWAYAM e-learning platform with at least 350 online courses. This would enable students to virtually attend the courses taught by chosen faculty, access high quality reading resources, participate in discussion forums, take tests and earn academic grades. Access to SWAYAM would be widened by linkage with DTH (Direct to Home) TV channels, dedicated to education.
The budget proposes adoption of a strategy called RAPID (Revenue, Accountability, Probity, Information and Digitisation) to maximise use of Information Technology to remove human contact with assesses as well as to plug tax avoidance. The government will maximise efforts for e-assessment in the coming year. There is also focus on utilising data mining capabilities, both in-house and outsourced.
Read the full budget speech here.