Standardization, Digitalization & Regulation were the key themes, in India’s financial story of 2017.
The year has been one of the substantial reforms and witnessed a landmark decisions made by the government.
Here’s a look at the top six events, which changed the personal finance workings of the common man in India:
Impact of GST
2017 saw historic rollout of single tax regime in the country—Goods and Services Tax (GST) on July 1. Amid all the political battling, the common man was left scratching his head about why a “good and simple tax” has raised prices for him. Even though the GST council has worked, to make GST more consumer-friendly, the last 5 months surely put a bigger hole in everyone’s pockets.
Mandatory Aadhar linking
Creating a visible digital identity for all financial transactions, the Government introduced linking of Aadhaar card for existing accounts and creating new ones (under the Prevention of Money Laundering) (Maintenance of Records) Rules, 2005. A huge measure to control tax evasion and increase transparency. While the court case over whether Aadhaar infringes the right to privacy still goes on, for all practical purposes it looks like it’s here to stay and make your financial life smoother and quicker.
Effects of demonetisation
Nov 8th marked the one year anniversary of demonetisation. Effectively, fall in bank deposit interest rates nudged people to move from fixed deposits to mutual funds. Slowdown in real estate led to shift in investments from real assets to stocks and mutual funds. Stagnation in gold prices moved money into stocks and mutual funds as well. This shift in saving and investment habits have made households become more interested in equities. Though there is a radical shift in the mindset and the share of financial assets in overall household investments, it is still abysmally low and will grow over the coming years.
Cut in small savings schemes interest rates
The interest rate on small savings schemes like National Savings Certificate, Public Provident Fund (PPF), Sukanya Samriddhi Yojana etc. went down over the last one year, although marginally. Despite the decline in rate of interest, these small savings schemes haven’t waned in popularity mainly because they tend to be safer and the interest offered on them is still higher than fixed deposits. Given the additional benefits under Section 80C, households have moved money from fixed deposits into these schemes.
Rise of alternative lending avenues
With the advent of direct lending, access to credit has become affordable to the masses and available through a number of options like P2P lending, crowdfunding platforms, marketplaces etc. because they offer convenient, quick and affordable financing options. Likes of Krazybee, Faircent, lendbox and others have become fairly popular in consumer lending.
Rise of Fintech, Wealthtech and Insurtech
Whether someone wants help with investments, loans, insurance, bills payments or just manage expenses, the rise of platforms and technologies have made all of it simpler, accessible and affordable. The introductions of policies and programs such as Jan Dhan Yojana, e-KYC, UPI or even the controversial linking of Aadhar have clearly shown the government’s interest in digitizing the sector.