Finance Minister Nirmala Sitharaman announced in her Budget 2022-23 speech that the Reserve Bank of India (RBI) will launch digital money in the next financial year, commencing April 2022, to stimulate the digital economy and improve currency management.

The digital economy will benefit greatly from the establishment of a central bank digital money. According to the minister, digital currency will aid in the currency management system.

"Digital currency will also lead to a more efficient and cheaper currency management system. It is therefore proposed to introduce digital rupee using blockchain and other technologies to be issued by the Reserve Bank of India, starting 2022-23," Sitharaman said.

She also stated that states will receive Rs 1 lakh crore in financial assistance in 2022-23 to help catalyse investment.

States will be allowed to run budget deficits of up to 4% of GDP in 2022-23, according to the finance minister.

The minister also suggested forming an expert committee to look into and recommend ways to increase venture capital and private equity investment.

Last year, venture capital and private equity firms spent more than Rs 5.5 lakh crore in India's startup and growth ecosystem, making it one of the largest in the world. She believes that scaling up this investment will necessitate a thorough study of regulatory and other roadblocks.

She noted that the government-backed Funds NIIF and SIDBI Fund of Funds have supplied scale capital, resulting in a multiplier impact, when it came to blended finance.

The government would promote thematic funds for blended finance to encourage vital sunrise industries such as climate action, deep-tech, digital economy, pharma, and agri-tech, with the government share limited to 20% and the funds administered by private fund managers, according to the minister.

"Creation of a blockchain-based central bank digital currency while bringing virtual digital assets under the tax net at the highest rate of 30 per cent will help reduce speculative play, especially in the cryptocurrency space," Shravan Shetty, MD, Primus Partners- Digital Currency, said.

Shetty stated that the central currency will aid in bringing the benefits of a digital currency to the economy in an organised manner.

According to Harry Parikh, Associate Partner – M&A Tax and Regulatory Services, BDO India, a hasty introduction of digital currency taxation combined with a withholding tax on every transaction might cause a slew of compliance challenges for crypto enterprises.