August 19, 2022
Good morning. In today’s either/view, we discuss whether the Indian economy can benefit from the FinTech boom. We also look at the reservation for sportspersons in all state departments of Karnataka, among other news.
📰 FEATURE STORY
FinTech – Can It Boost The Indian Economy?
FinTech, or financial technology, saw exponential growth in the wake of the pandemic as many services were transitioning to be more online-friendly. India has secured the position of being a solid FinTech hub globally as the market is promising. Although the numbers seem convincing, many industry leaders are sceptical about the profitability of this industry.
While there are many expectations from this sector, is FinTech the solution to boosting India’s economy?
Context
By provisional estimates, the Indian economy recorded a sharp growth of 8.7% in 2021-22 from 6.6% in 2020-21. The International Monetary Fund’s World Economic Outlook has estimated that India will become a $5 trillion economy by 2026-27 and a large part of this growth is attributed to the growth in digital services, specifically financial.
The rising popularity of FinTech firms stems from the ease of access and transparency. They penetrated the unbanked population in the country, leading to financial inclusion and thereby economic growth. The rising consumer base in the country eased the friction between financial institutions and retail customers.
In another step to support FinTech firms, the Reserve Bank of India outlined policies under the regulatory sandbox that promoted Small Finance Banks (SFBs) in order to focus on unserved sectors, payment and digital banks that focus on credit facilitation, and others. The government regulating this sector is an indication of its attempts to contribute to the Digital India movement.
The fast-paced development of the FinTech industry in India could be a result of many goals set by the government. Schemes such as the Atal Innovation Mission, created to further financial inclusion, have been scaled up by digital tools, resulting in an economic boost. The favourable policies rolled out by the RBI further facilitated the growth of FinTech firms.
VIEW: FinTech is the key to economic growth
The expectations from the FinTech industry in the country are vast. It is estimated that the sector will reach $1 trillion in Assets under management (AUM) and $200 billion in revenue by 2030. A recent Niti Aayog report also highlighted that FinTech coupled with a regulatory sandbox regime would help India achieve its $5 trillion target.
FinTech has successfully altered the way the Indian population interacts with the financial system. Even the government has facilitated this shift with initiatives such as Jan Dhan Yojana, Unified Payment Interface (UPI) and widespread Aadhar linking. Having amassed a $50 billion valuation in 2021 in addition to a supportive government, the FinTech industry has cornered a huge chunk of the market for itself.
According to BLinC Invest’s 2022 report, India’s FinTech market is already the third largest in the world. The finance ministry of the country has also estimated that the market will reach about $160 billion by 2025. Before the FinTech industry had a substantial footing, concepts such as Buy Now Pay Later (BNPL), Neo Banks, Insurtech and others were unheard of. These could potentially boost the financial infrastructure of the country.
As a part of the RBI’s financial inclusion agenda, an internal FinTech department was set up in January 2022. This facilitated the smooth working of the FinTech industry, accelerating the usage of UPI and mobile banking. Commerce Minister Piyush Goyal also pointed out that India’s FinTech adoption rate last year was 87% as opposed to the global average of 64%, second only to China.
COUNTERVIEW: FinTech is too risky
While there are undeniable upsides to FinTech firms in the country, many experts remain cautious of the potential risks the industry carries. A report published by Matrix Partners India and Boston Consulting Group revealed that 70% of industry leaders believe that FinTech firms in India may not be profitable in the next 2-3 years as the focus is solely on scale and not on profitability and compliance.
Since the FinTech industry has evolved so rapidly, regulatory bodies are finding it hard to keep up. The RBI Governor, Shaktikanta Das, expressed this concern as he stated that since Big Tech companies have also started offering financial services, it could potentially disrupt the financial system if not regulated properly. “Authorities and regulators have to strike a fine balance between enabling innovation and preventing systemic risks,” RBI Governor said.
The problem of data protection, data privacy, documentation, breach of licensing conditions and other unfair practices in the FinTech industry also pose a substantial risk. The unparalleled expansion of the industry has left regulatory bodies lagging behind, leading to an unchecked industry.
The financial stability report (FSR) released by the RBI has pointed out some major problems with FinTech firms. The report stated that the complex linkages between Big Tech firms and financial institutions could lead to concentration and contagion risks, ultimately leading to potential anti-competitive behaviour. Additionally, the RBI Governor warns that cryptocurrencies are a clear danger as their value is derived from “speculation under a sophisticated name.”
What’s your opinion on this?
(Only subscribers can participate in polls)
a) Gains from FinTech to the Indian economy outweigh the risks.
b) Risks from FinTech to the Indian economy outweigh the gains.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
The Bogey of ‘Forced Conversions‘ Has Long Diverted Us From The Realities Of Indian Christians
For the Left:
Nitish Kumar Has Been Wrongly Associated With ‘Good Governance’, Sushasan Babu Tag Sits Badly On Him
🇮🇳 STATE OF THE STATES
Congress revolt? (Jammu & Kashmir) – There seems to be the beginnings of an internal revolt within the Congress in the wake of Ghulam Nabi Azad’s recent resignation from the party’s Jammu and Kashmir committee. Citing health reasons, he stepped down and thanked Congress President Sonia Gandhi for giving him the opportunity. Two other Congress leaders have decided to follow Azad as one of them expressed unhappiness with the senior leaders.
Why it matters: Azad is one of the senior-most leaders of the party and has a lot of influence in Jammu & Kashmir. He has served as its Chief Minister in the past and held portfolios of a Union Minister too. His resignation indicates all is not well within the leadership ranks. There’s concern that it might lead to a revolt by other leaders against the party’s top brass.
Reservation for sportspersons (Karnataka) – Chief Minister Basavaraj Bommai announced his government would provide 2% reservation for sportspersons in all state departments along the lines of existing quotas in the police and forest department. He was speaking at a function facilitating 75 sportspersons selected under the ‘Amrit Kreeda Dattu’ scheme and who won medals at the recent Commonwealth Games.
Why it matters: Bommai said Karnataka is the first state to implement the Kreeda Dattu scheme to improve sports stadia. He said Karnataka had adopted basketball as the state sport, and the rural sports meet will begin in two months to identify sporting talents.
Sports university (West Bengal) – Chief Minister Mamata Banerjee announced a ₹50 lakh grant to develop the infrastructure of East Bengal and Mohammedan Sporting football clubs. She also said the government would soon set up a sports university in Kolkata. She spoke of her love of football as she inaugurated the East Bengal Museum. She said the government would support the sportspersons of the state.
Why it matters: The state has taken steps to help improve sporting infrastructure. In March, a private organisation approached the Siliguri Jalpaiguri Development Authority for land to set up world-class infrastructure for sports in Siliguri. The Housing Infrastructure Development Corporation (HIDCO) proposed a sports city at Howrah’s Dumurjola conceptualised by the state in 2018.
E-visa wishes (Goa) – With the charter season soon approaching, the state is hopeful that the Centre will approve its request to extend the e-visa facility for UK travellers. Currently, the UK has been excluded from the list of countries eligible for e-visas. Tourist operators said they’re getting inquiries from British charter operators. The amount of business they get from them will depend on the e-visa issue.
Why it matters: If the Centre doesn’t approve the e-visas, there will be fewer British travellers to Goa. The UK is the biggest market for the state after Russia. Brits usually come to Goa to get away from the cold winters. One hotelier said getting paper visas for older tourists is taxing and expensive. Due to the travel restrictions over the past two years, the tourism sector in the state has been affected with various hotels and businesses shut.
Revising Kharif calendar (Assam) – The state government wants to revise the Kharif crop calendar to align it with the erratic nature of the monsoon. A crop calendar contains information on when to sow and harvest specific crops based on rainfall and temperature forecasts in the region. The state’s agriculture department and the Assam Agriculture University (AAU) requested a revision from the Indian Council of Agricultural Research-Central Research Institute for Dryland Agriculture (CRIDA).
Why it matters: Experts say they’ve been seeing an unusual trend for the past five to six years as Kharif crops are flooded one year and face drought-like conditions the next. The volume of rainfall in the state’s six agroclimatic zones has decreased. In other regions, there have been high pre-monsoon showers. This has an impact on the rice yield, which accounts for 96% of the state’s total food grain production.
🔢 KEY NUMBER
₹1 lakh – The fine imposed on Flipkart by Central Consumer Protection Authority (CCPA). It pertains to the e-commerce company selling sub-standard pressure cookers. The CCPA asked the company to recall 598 pressure cookers sold on the platform.