Hi everyone,  

Welcome to the 139th edition of The Pattern, a weekly where we dive into the latest from the world of economy, technology and finance. Let’s get started. 

It's that time of the year again!  

As we count down to the Union Budget 2025, the nation's economic compass is ready to reset and adapt to what awaits. Union Budget 2024-25 set the stage for bolstering employment, skilling, MSMEs, and the middle class. The past year's announcements also enhanced Mudra loan limits from doubling the load limit to INR 20 lakhs to a record INR 1.52 lakh crore allocated for agriculture and allied sectors. The initiatives were remarkable. Yet, as we prepare for what lies ahead, the cracks in the foundation of India's economic growth can no longer be ignored. 

India's real GDP growth, once the pride of our post-pandemic recovery, has slowed to a seven-quarter low of  5.4 % in Q2 FY 2024-25. That's just the beginning of a downward slope as, according to the reports, GDP growth is expected to hit a four-year low of 6.4% in 2024-25. This marks a sharp drop from the robust 8.2% growth recorded the previous year and is the weakest performance since the pandemic-triggered slump in 2020-21. 

Yet, amid this deceleration, one sector continues to shine brightly—fintech. From the UPI surpassing over  16.58 billion transactions in October 2024, marking a 45% YoY growth, to RBI's leadership and strong compliance, coupled with the expansion of the Account Aggregator (AA) framework, shows how India's financial system is showing hope while digital payment ecosystem is becoming gold standard, globally. 

As Nirmala Sitharaman, our finance minister, gears up to unveil the 'red book' for the financial year 2025-2026, here's what the fintech sector is wishing for: 

1. Fuelling MSME growth  

India's MSME sector, the backbone of the economy, contributed 30% to the GDP last year and provides jobs to 62% of the workforce. Yet, it struggles to stay afloat in a sea of unmet financial needs. Only 14% of these businesses have access to formal credit, and the rest face a glaring funding gap. To bridge the gap, fintech players are stepping in as navigators, advocating for tailored financial products, tax revisions, and innovative solutions to help these enterprises sail toward growth and stability.  

Experts like Ritesh Jain , co-founder of FlexiLoans.com, propose simplifying eligibility criteria under schemes like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and introducing a dedicated fund to bolster fintech-driven credit evaluation tools. 

Mukesh Pandey, Director at Rupyaa Paisa, stresses the role of digital platforms like ULI and TReDS in easing funding woes while calling for higher credit guarantee funds and greater transparency in processes. For MSMEs, this budget could be the bridge between aspiration and access. 

2. Building digital bridges  

For fintech firms, digital lending isn’t just about moving money—it’s about moving the needle on financial inclusion. Rohit Garg, Co-founder and CEO of Olyv, highlights the sector's hopes for initiatives that expand financial inclusion through robust digital lending frameworks. The wishlist is ambitious yet meaningful: tax breaks for digital lending platforms, investment in state-of-the-art technologies, and stronger digital infrastructure. These are like building the foundation of a house that’s open to everyone.  

3. Innovating tech for tomorrow  

Innovation is the engine that keeps the fintech ecosystem running smoothly. Industry leaders are calling for greater investment in tools like AI, machine learning, and advanced credit systems. These aren’t just gears that drive progress—they’re also the brakes that help prevent fraud, ensuring the system runs efficiently and securely. By expanding regulatory sandboxes for emerging technologies like blockchain and AI-driven payment platforms, India can balance innovation with robust consumer protection, ensuring a secure future for digital payments. By embracing regulatory frameworks for technologies like blockchain and AI, India could emerge as a global leader in digital payments. 

4. Educating credit borrowers  

While fintech solutions are sophisticated, the end-user must be equally empowered. Expanding digital payment infrastructure in rural and semi-urban areas remains a priority, but experts stress the importance of credit literacy. This is an important factor that remains responsible for borrowing and lending. Seamless transactions are only part of the picture—users need the skills to detect and prevent fraud, understand repayment terms, and make informed financial decisions. Fintech leaders envision a budget that supports comprehensive financial literacy programs, fostering a culture of responsible financial behaviour. 

5. Expanding horizons of UPI  

In the fintech space, UPI shined the brightest over the horizon last year. But it's time for it to up its game because only 6.3% of India's 64 million businesses have gone digital. This means there’s a huge opportunity for change. Shifting UPI's focus to enterprise solutions could unlock advanced payment capabilities, boost efficiency, and power economic growth. Industry leaders are also keen on policies that position UPI on the global stage, from streamlined compliance norms to incentives for international expansion. 

Now it's time to wait and see how soon we can put a checkmark against the wishlist we have anticipated for the budget 2025-2026. Does fintech make sufficient cuts, or are better things on the way? Till then, let's keep the spirit high! 

Reading List:  

1. Is the rupee falling because we underestimated the dollar?  

2. Union Budget 2025: Before budget, a few positives blink on Sitharaman's dashboard  

3. Mid-tier businesses turn to private credit funds amid slowed bank lending  

4. Indian households saving more or just drowning in debt?  

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter here and follow FinBox on LinkedIn to always get all updates. 

Cheers, 

Mayank  

All opinions expressed are my own and do not necessarily reflect the views of FinBox or its promoters.