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In alignment with India’s aim to foster a more investment-friendly environment and encourage a trust based regulatory framework, the government has proposed to review the existing regulators and create a principle based framework. This will ease the complexity, avoid multiple amendments and enable flexibility to keep up with the technological developments.
To underscore the significance of this endeavour, a high-level committee will be formed to review non-financial sector regulations, certificates, and licenses. This committee will be tasked with providing recommendations grounded in trust-based economic governance and streamlining compliance and inspection processes, thereby fostering a more conducive environment for business operations.
The increase limit on TCS applicability from 7 lac to 10 lac wouldn’t really have the desired effect given that in the context of the total LRS limit of USD 2,50,000 this increase is less that 1.5%.
The past few budgets have recognised the need for a strong financial sector to meet the needs of the nation. Keeping abreast with the development of the financial sector, the government basis the Insurance Laws (Amendment) Bills, 2024, has raised the FDI limit in the insurance sector from 74% to 100%. This would promote further investments by key investors and make the sector competitive and comparable to global players.
Budget 2025 announces reforms in the agriculture sector including Dhan Dhanya Krishi Yojna, high yield seed varieties, and crop diversification to allow for greater produce and creation of employment. This helps farmers achieve self-sufficiency and reduce migration. These measures will allow for higher export of produce outside India and boost cross-border trade, and ultimately limit migration to metro cities.
Keeping up with the approach in the previous few budgets, the government has once again focused on the Indian startups with a clear intention to innovate through technology and better access to capital, investment. To achieve the same the government has established a new fund of fund with expanded scope and fresh contribution of 10,000 Cr rupees to achieve the same. These funds of funds would receive a commitments for over 9 lakh crore. With majority of the youth tilting to the start up India, this move by the government would indeed be a step closer to Viksit Bharat.
In line with the objectives of the Budget 2025, the Government has announced a new manufacturing initiative under the “Make in India” campaign to provide extensive policy support and a structured framework to assist small, medium, and large-scale industries. This mission is proposed to be focused on establishing an ecosystem for solar PV cells, electrolysers, and grid-scale batteries. This will boost domestic manufacturing, create jobs, drive technological advancements, promote sustainability, enhance competitiveness, attract foreign investment, develop infrastructure, and improve energy security in India.
The Budget proposes a scheme to enhance the seafood industry and boost fisheries exports in exclusive economic zones and the high seas, with a particular focus on the Andaman & Nicobar Islands. As one of the largest seafood exporters globally, the Indian economy will benefit from these supportive policies, which are expected to further strengthen the sector and facilitate cross-border trade.
The PM Swanidhi Scheme will be revamped with higher loan limits and the introduction of a ₹30,000 UPI-linked credit card. The government will also facilitate identity card issuance and registration on the e-Shram portal for gig workers, providing insurance coverage for nearly 1 crore workers. This is clear move by the government to promote financial digital technology amongst the people of the nation and make India a fintech hub.
One of the key announcements by the Finance Minister to enhance trade finance is the introduction of cross-border factoring. This will enable Indian exporters to access liquidity by entering into factoring arrangements with foreign financiers. It will also help them comply with the RBI’s export directions, which require repatriation of export proceeds within nine months.
The government has announced the “Promote Export” Mission, aiming to provide export credit and implement non-tariff measures. Specifically, cargo screening and customs clearance processes are proposed to be made user-friendly to allow for ease of doing business . Further, the initiative includes establishing an international trade uniform platform to align trade documentation with global standards. These measures will streamline regulatory processes, and reduce barriers to international trade, ultimately boosting export volumes and contributing to economic growth in India.
On KYC changes:
The Finance Minister’s announcement on implementation of a revamped CKYC registry this year is welcome news for market players in the BFSI segment. KYC compliance burden has been a huge pain point for the industry over the last few years. A streamlined system for periodic KYC updation will help spur the growth of the financial ecosystem by reducing time and costs incurred for customer onboarding. This can also potentially reduce customer dropouts during a digital onboarding process adopted by financial service providers.
On MSME credit:
The proposed changes to the classification criteria for MSMEs and enhancement of credit guarantee cover provided under various credit guarantee schemes demonstrates the Government’s ongoing commitment to further develop and grow the MSME segment. Improving the ease of access to credit for MSMEs will increase their contribution to the economy and would result in a net positive impact for social and economic development.
On FSDC evaluation:
The Budget proposal to create an evaluation mechanism under the Financial Stability and Development Council (FSDC) to ascertain the impact of financial regulations on the ecosystem is a welcome move in the right direction. The FSDC is an apex body consisting of representatives from all financial sector regulators and the Government. With the advent of self-regulatory organisations (SROs), we expect to see more dialogue and collaboration with the industry in determining the path forward for the financial ecosystem.
AIF
The Finance Bill seeks to put an end to the controversy around the characterization of income earned by Category I / II Alternative Investment Fund (“AIF”) as ‘capital gain’ vs ‘business income’. It is proposed that income arising on transfer of shares and securities shall be treated as capital gain which will be exempt from tax for the AIF and taxed directly in the hands of investors on a pass through basis.
In alignment with India’s aim to foster a more investment-friendly environment and encourage a trust-based regulatory framework, the government has proposed to review the existing regulators and create a principle based framework. This will ease the complexity, avoid multiple amendments, and enable flexibility to keep up with technological developments.
To underscore the significance of this endeavor, a high-level committee will be formed to review non-financial sector regulations, certificates, and licenses. This committee will be tasked with providing recommendations grounded in trust-based economic governance and streamlining compliance and inspection processes, thereby fostering a more conducive environment for business operations.
The increased limit on TCS applicability from 7 lac to 10 lac wouldn’t really have the desired effect given that in the context of the total LRS limit of USD 2,50,000 this increase is less than 1.5%.
The past few budgets have recognised the need for a strong financial sector to meet the needs of the nation. Keeping abreast with the development of the financial sector, the government basis the Insurance Laws (Amendment) Bills, 2024, has raised the FDI limit in the insurance sector from 74% to 100%. This would promote further investments by key investors and make the sector competitive and comparable to global players.
Budget 2025 announces reforms in the agriculture sector including Dhan Dhanya Krishi Yojna, high yield seed varieties, and crop diversification to allow for greater produce and the creation of employment. This helps farmers achieve self-sufficiency and reduce migration. These measures will allow for higher export of produce outside India and boost cross-border trade, and ultimately limit migration to metro cities.
Keeping up with the approach in the previous few budgets, the government has once again focused on the Indian startups with a clear intention to innovate through technology and better access to capital, and investment. To achieve the same the government has established a new fund of fund with expanded scope and fresh contribution of 10,000 Cr rupees to achieve the same. These funds of funds would receive a commitment for over 9 lakh crore. With majority of the youth tilting to the start-up India, this move by the government would indeed be a step closer to Viksit Bharat.
In line with the objectives of the Budget 2025, the Government has announced a new manufacturing initiative under the “Make in India” campaign to provide extensive policy support and a structured framework to assist small, medium, and large-scale industries. This mission is proposed to be focused on establishing an ecosystem for solar PV cells, electrolysers, and grid-scale batteries. This will boost domestic manufacturing, create jobs, drive technological advancements, promote sustainability, enhance competitiveness, attract foreign investment, develop infrastructure, and improve energy security in India.
The Budget proposes a scheme to enhance the seafood industry and boost fisheries exports in exclusive economic zones and the high seas, with a particular focus on the Andaman & Nicobar Islands. As one of the largest seafood exporters globally, the Indian economy will benefit from these supportive policies, which are expected to further strengthen the sector and facilitate cross-border trade.
The PM Swanidhi Scheme will be revamped with higher loan limits and the introduction of a ₹30,000 UPI-linked credit card. The government will also facilitate identity card issuance and registration on the e-Shram portal for gig workers, providing insurance coverage for nearly 1 crore workers. This is a clear move by the government to promote financial digital technology amongst the people of the nation and make India a fintech hub.
One of the key announcements by the Finance Minister to enhance trade finance is the introduction of cross-border factoring. This will enable Indian exporters to access liquidity by entering into factoring arrangements with foreign financiers. It will also help them comply with the RBI’s export directions, which require repatriation of export proceeds within nine months.
The government has announced the “Promote Export” Mission, aiming to provide export credit and implement non-tariff measures. Specifically, cargo screening and customs clearance processes are proposed to be made user-friendly to allow for ease of doing business . Further, the initiative includes establishing an international trade uniform platform to align trade documentation with global standards. These measures will streamline regulatory processes, and reduce barriers to international trade, ultimately boosting export volumes and contributing to economic growth in India.
On KYC changes:
The Finance Minister’s announcement on implementation of a revamped CKYC registry this year is welcome news for market players in the BFSI segment. KYC compliance burden has been a huge pain point for the industry over the last few years. A streamlined system for periodic KYC updation will help spur the growth of the financial ecosystem by reducing time and costs incurred for customer onboarding. This can also potentially reduce customer dropouts during a digital onboarding process adopted by financial service providers.
On MSME credit:
The proposed changes to the classification criteria for MSMEs and enhancement of credit guarantee cover provided under various credit guarantee schemes demonstrates the Government’s ongoing commitment to further develop and grow the MSME segment. Improving the ease of access to credit for MSMEs will increase their contribution to the economy and would result in a net positive impact for social and economic development.
On FSDC evaluation:
The Budget proposal to create an evaluation mechanism under the Financial Stability and Development Council (FSDC) to ascertain the impact of financial regulations on the ecosystem is a welcome move in the right direction. The FSDC is an apex body consisting of representatives from all financial sector regulators and the Government. With the advent of self-regulatory organisations (SROs), we expect to see more dialogue and collaboration with the industry in determining the path forward for the financial ecosystem.
AIF
The Finance Bill seeks to put an end to the controversy around the characterisation of income earned by Category I / II Alternative Investment Fund (“AIF”) as ‘capital gain’ vs ‘business income’. It is proposed that income arising on transfer of shares and securities shall be treated as capital gain which will be exempt from tax for the AIF and taxed directly in the hands of investors on a pass through basis.
Special Window for Affordable and Mid Income Housing (SWAMIH)
Building further on the success of Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund-I in delivering over 50,000 houses until 2024 through extension of priority debt funding to stressed housing projects, the Hon’ble Finance Minister has announced the second fund with an expected investment of INR 15,000 crores. The Fund can be expected to provide blended debt facility to such stalled real estate projects across the country and aid completion and delivery of over 100,000 apartments. This last mile funding will go a long way in arresting erosion of the debt/ investment made by the existing lenders and the homebuyers in these projects. This will also provide viable investment participation avenue to private investors alongside the government and the investment may hopefully, also enjoy priority treatment similar to Fund I in case of insolvency of the relevant real estate SPV under the IBC regime.
FDI in Insurance sector up by 25%
Increase of FDI to 100% in the insurance sector is a very positive move and will help usher in greenfield investment from marquee foreign insurance firms not yet present in India and will also see existing foreign insurance players buyout their Indian joint venture partners and private equity players keen to monetize their stake. With the IRDAI having already made all-round regulatory changes in the recent years with an aim to bolster market penetration, the Indian insurance sector is certainly going to be very busy in the coming years with this bold move by the Indian government.
Credit Access
The announcements made in the Union Budget 2025 indicates continued Government focus for providing enhanced credit access for the infrastructure sector, through National Bank for Financing Infrastructure and Development (NaBFID). This is expected to play a crucial role in reviving and providing impetus to long-term infrastructure financing, including the development of bonds and derivatives markets to further augment infrastructure growth. Additionally, NaBFID is proposed to act as a market maker to ensure liquidity in the bond market and provide innovative credit enhancement solutions. With a strong emphasis on sustainable finance, NaBFID is poised to contribute significantly to climate-resilient infrastructure development, thereby boosting project financing and promoting economic growth in India.
Global Capability Centres
The Finance Minister’s proposal to introduce a national guidance framework for Global Capability Centres (GCCs) especially for emerging Tier 2 cities is a positive signal. This initiative comes at an opportune time, as India’s GCC market is projected to experience significant surge.By announcing introduction of a national guidance framework to support growth of Global Capability Centres, along with focus on upskilling through establishment of Centres of Excellence, the Government of India has clearly recognised the significance of Global Capability Centres to India’s growth story. This is an encouraging move aimed at keeping India at the forefront of innovation”