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Union Finance Minister Nirmala Sitharaman recently presented the last full budget of the second term of the Modi-led BJP government, before the General Elections in 2024. Labeled the first during the ‘Amrit Kaal’ or the period of 25 years leading to the 100th year of India’s independence, the budget has gained varied, mostly positive, reactions from the industry experts who have termed the budget as a growth-oriented one, with particular focus on green growth.

Here are reactions from leading industry experts and Bombay Chamber members on the budget:

In the Union Budget 2023-24, Finance Minister Nirmala Seetharaman has announced slew of measures to boost exports and help accelerate growth of manufacturing in the country. Following are the highlights for the export and manufacturing sector:

• The Department of Commerce’s recommendation on lab grown diamond (LGD) has been accepted whereby a research grant of Rs. 242 crore over a period of 5 years to IIT Madras has been approved. This will enable indigenisation of the manufacturing process of LGD. Further, reduction of duty on LGD seeds from 5% to 0% has also been accepted which will result in reducing the cost of production of LGD growers and make our LGD exports globally competitive. The recommendation of the Department of Commerce for creating separate HS Codes for LGD has also been accepted. It would enable tracking the international trade in lab grown diamonds.
• Custom duty on articles of precious metals such as gold, silver and platinum has been increased from 20% to 25% thereby increasing the duty differential to 10% over gold/silver/platinum bars. This will boost domestic manufacturing in the sector and result in import substitution. Custom duty on imitation jewellery has been enhanced from 20% to 25%. This will discourage cheap imports from China and encourage domestic manufacturing.
• The reduction in import duty of fish meal from 15% to 5% will make the shrimp industry more competitive in the country and boost exports. The fish meal constitutes 40% of the cost of production of shrimps. This will also prevent incidence of juvenile fishing which is used for fish meal in domestic production and will thereby improve our marine fish stock availability.
• The recommendation of the Department of Commerce to increase import duty on compound rubber from 10% to 25% has been agreed to. This will reduce the import of compound rubber in the country and boost demand and prices for natural rubber produced in the country. This will go a long way in supporting our natural rubber farmers and further increasing its production in the country.
• The budget has identified the financial sector as a priority sector. Measures to enhance business activities in GIFT IFSC, comprehensive review of existing financial sector regulations and support for digital payments will promote India’s financial services exports in the long run.
• Integrated development of at least 50 tourism destinations and measures related to enhancement of tourist’s experience will provide impetus to foreign tourist arrival in India which will enhance tourism service exports.

Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, presented the Economic Survey 2022-23 in the Union Parliament today. The highlights of the Survey are as follows:

• Recovering from pandemic-induced contraction, Russian-Ukraine conflict and inflation, Indian economy is staging a broad based recovery across sectors, positioning to ascend to the pre-pandemic growth path in FY23.
• India’s GDP growth is expected to remain robust in FY24. GDP forecast for FY24 to be in the range of 6-6.8 %.
• Private consumption in H1 is highest since FY15 and this has led to a boost to production activity resulting in enhanced capacity utilisation across sectors.
• The Capital Expenditure of Central Government and crowding in the private Capex led by strengthening of the balance sheets of the Corporates is one of the growth drivers of the Indian economy in the current year.
• The credit growth to the MSME sector was over 30.6 per cent on average during Jan-Nov 2022.
• Retail inflation is back within RBI’s target range in November 2022.
• Indian Rupee performed well compared to other Emerging Market Economies in Apr-Dec2022.
• Direct Tax collections for the period April-November 2022 remain buoyant.
• Enhanced Employment generation seen in the declining urban unemployment rate and in the faster net registration in Employee Provident Fund.
• Economic growth to be boosted from the expansion of public digital platforms and measures to boost manufacturing output.

India’s Medium Term Growth Outlook: with Optimism and Hope

• The Indian economy underwent wide-ranging structural and governance reforms that strengthened the economy’s fundamentals by enhancing its overall efficiency during 2014-2022.
• With an underlying emphasis on improving the ease of living and doing business, the reforms after 2014 were based on the broad principles of creating public goods, adopting trust-based governance, co-partnering with the private sector for development, and improving agricultural productivity.
• The period of 2014-2022 also witnessed balance sheet stress caused by the credit boom in the previous years and one-off global shocks, that adversely impacted the key macroeconomic variables such as credit growth, capital formation, and hence economic growth during this period.
• This situation is analogous to the period 1998-2002 when transformative reforms undertaken by the government had lagged growth returns due to temporary shocks in the economy. Once these shocks faded, the structural reforms paid growth dividends from 2003.
• Similarly, the Indian economy is well placed to grow faster in the coming decade once the global shocks of the pandemic and the spike in commodity prices in 2022 fade away.
• With improved and healthier balance sheets of the banking, non-banking and corporate sectors, a fresh credit cycle has already begun, evident from the double-digit growth in bank credit over the past months.
• The Indian economy has also started benefiting from the efficiency gains resulting from greater formalisation, higher financial inclusion, and economic opportunities created by digital technology-based economic reforms.
• India’s growth outlook seems better than in the pre-pandemic years, and the Indian economy is prepared to grow at its potential in the medium term.
• UPI-based transactions grew in value (121 per cent) and volume (115 per cent) terms, between 2019-2022, paving the way for its international adoption

The International Monetary Fund (IMF) said it is expecting some slowdown in the Indian economy next fiscal year and projected growth to slow down to 6.1 percent from 6.8 percent during the current fiscal ending March 31. In the January update of its World Economic Outlook, the IMF said that the global growth is projected to fall from an estimated 3.4 percent in 2022 to 2.9 percent in 2023, then rise to 3.1 percent in 2024.

“Growth in India is set to decline from 6.8 percent in 2022 to 6.1 percent in 2023 before picking up to 6.8 percent in 2024, with resilient domestic demand despite external headwinds,” said the IMF’s World Economic Outlook update. According to the report, growth in emerging and developing Asia is expected to rise in 2023 and 2024 to 5.3 percent and 5.2 percent, respectively, after the deeper-than-expected slowdown in 2022 to 4.3 percent attributable to China’s economy.

According to IMF chief economist Pierre-Olivier Gourinchas, the risk of recession has subsided and central banks have been making progress in controlling inflation. However, the war in Ukraine and China’s Covid-19 struggles could hamper growth and more work was needed to curb prices.

The Reserve Bank of India recently released the Discussion Paper on SSAF inviting comments from stakeholders. As part of the Statement on Developmental and Regulatory Policies released on September 30, 2022, RBI had proposed to introduce a framework for securitisation of stressed assets, in addition to the ARC route. It was announced that a discussion paper detailing relevant contours of the proposed framework would be issued shortly.

The Discussion paper broadly covers nine relevant areas of the framework including asset universe, asset eligibility, minimum risk retention, regulatory framework for special purpose entity and resolution manager, access to finance for resolution manager, capital treatment, due diligence, credit enhancement, and valuation. It draws upon similar frameworks introduced in other jurisdictions, while trying to keep it structurally aligned with the framework for securitisation of standard assets.
Securitisation involves pooling of loans and selling them to a special purpose entity (SPE), which then issues securities backed by the loan pool. RBI has invited comments which can be submitted by February 28, 2023.

Read Discussion Paper

India’s banking sector has always been at the forefront of driving digitisation and adopting Artificial Intelligence. The recent Covid-19 pandemic has further accelerated the process with both the industry and the Government pushing for further digitisation in the BFSI sector. As per news reports, in the upcoming Budget, the government is likely to scale up its flagship financial inclusion schemes while focusing on digitisation. This would include setting up more digital banking units (DBUs) and bringing about a digital interface for greater integration between Jan Dhan accounts, Jeevan Jyoti and Suraksha Bima Yojana.

It is with this background that the Bombay Chamber, under the aegis of the BFSI Committee, organised its Conclave on the highly relevant topic, ‘Digitisation in the Indian Banking Sector.’ The Conclave, which was held in a hybrid mode, saw knowledge-driven sessions featuring expert minds discussing the topic and the way forward.

Welcoming the audience, Mr Nilesh Shah, President, Bombay Chamber & Group President & MD, Kotak Mahindra AMC, spoke about Bombay Chamber’s role in developing trade and commerce in Mumbai and the country and how technology and digitisation will fuel our next trillion-dollar economy. Emphasising that capturing this digitisation in the BFSI industry is highly critical, Mr Shah cautioned that companies that evolve and adopt technology will benefit from it, while those that fail, face the threat of extinction.

Laying the grounds of the discussion, the Chief Guest of the event, Shri Ajay Kumar Choudhary, Executive Director, Reserve Bank of India, spoke about the evolution of digitisation in the Indian banking sector, the enactment of the Information Technology Act, which provided impetus towards electronic transaction and e-commerce and served as a platform for further digitisation, the introduction of further conduits of the digitisation drive of the banking sector, and how Covid-19 drove faster adoption of technology. However, with the digitisation process comes risks that may affect public trust in the financial system. Shri Chaudhary advised banks to upgrade their core systems, focus on customer relationships, and address the risks and concerns that come with the digitisation of finance while ensuring that innovations are responsible and meet the principles of governance and customer- centricity.

The first panel discussion, moderated by Mr Rajiv Anand, Deputy Managing Director, Axis Bank had Mr Anand Mihir, Partner, Risk Consulting, EY India, Mr Sajish Pillai, Managing Director & Head – Assets and Strategic Alliances, Consumer Banking Group, DBS Bank, India and Mr Arpit Ratan, CBO & Co-Founder, SignZy deliberating on the topic of Ecosystem Banking and Neo-banking in the Transformative Stage.

The panel discussion was followed by an interesting presentation on neobanking by Mr Pratik Shah, Partner and Leader, Financial Service Consulting, EY India, who spoke about how the next generation will drive digitisation trends in the banking sector and how banks will need to cash in on this market.

The second panel discussion focused on the pertinent topic of Digitisation in Rural India and of taking technology to the farmers. The panel was moderated by Mr Harshvardhan Bisht, Partner, Financial Service Consulting, EY India, and had Mr Ashok Dhamankar, Chief Financial Officer – Financial Services, UPL, Mr Prateep Basu, CEO, SatSure and Mr Sridhar Easwaran, Founding Member, Samunnati Financial Intermediation & Services, who joined in virtually, as the speakers.

With digitisation becoming ever-pervasive in the BFSI sector, cybersecurity takes on paramount importance. The final panel discussion of the Conclave saw Moderator, Mr Dilip Panjwani, Global Head – Cybersecurity Practice & CoE, LTIMindtree, along with our panelists Mr Anu Tiwari, Partner, (Cohead) Fintech, Mr Kartik Shinde, Partner, Cyber Security and Data Privacy, EY India, and Mr Rajesh Thapar, CISO, Axis Bank, discuss the topic of Cybersecurity and Artificial Intelligence.

Delivering his Vote of Thanks, Mr. Abizer Diwanji, Head Financial Services, EY, gave a round-up of the event and spoke about how today, data is the new oil, which is gushing out and how it is the duty of the security industry and banking to control the data so that there is a more reformed banking system.

As per the Government, within two-and-a-half years of the implementation of the Agriculture Infrastructure Fund (AIF), the scheme has mobilised more than Rs.30,000 crore for projects in the agriculture infrastructure sector with a sanctioned amount of Rs.15,000 crores.

With support of 3% interest subvention, credit guarantee support through CGTMSE for loan of upto Rs.2 crore and facility of convergence with other Central and State Govt. Scheme, AIF is providing all around financial support to the farmers, agri-entrepreneurs, farmer groups like Farmer Producer Organisations (FPOs), Self Help Groups (SHGs), Joint Liability Groups (JLGs) etc. and many others to create post-harvest management infrastructure and build community farming asset throughout the country.

Agriculture Infra Fund (AIF) is a financing facility launched in 2020, for the creation of post-harvest management infrastructure and community farm assets. Under this scheme, Rs 1 lakh crore is to be disbursed by the financial year 2025-26 and the interest subvention and credit guarantee assistance will be given till the year 2032-33.

Any interpretation of the ESI Act should lean in favour of the beneficiaries – Supreme court

Copy of judgement is attached

The Directorate General of Foreign Trade (DGFT) has notified the amended rules for calculating Composition Fee for extending Export Obligation under Advance Authorization Scheme.

According to the Ministry of Commerce & Industry, simplifying calculations for Composition Fees will help in automation and faster service delivery by making the process more efficient and easier to understand. The revised Composition Fee formula, based on a specific rate for different levels of the ‘CIF value of Authorisation’, is more straightforward to calculate. 

This will help automate the entire Export Obligation extension process with minimal human intervention, further eliminating the risk of errors and misconceptions. Automating the process will reduce the need for manual calculations and paperwork, ultimately leading to faster service delivery. This will benefit exporters, reducing the time and effort required to complete the Export Obligation extension process. 

Additionally, as per the Ministry, simplifying calculations reduces the complexity and makes the process more straightforward for exporters, leading to trade facilitation and ease of doing business.