3rd Millennium – Opportunities, Issues and Challenges R.Kannan , Hinduja Group International Research Conference conducted by Indian Accounting Association, University of Mumbai and Chadrabhan Sharma College on 7th April 2018 . Hon’ble Member of Parliament, Shri Dr. Kirit Somaiyaji, Prof.Shiware, Prof Chitra Natarajan, Prof. Ashok Joshi, Prof. Madhu Nair, Prof Pratima Singh, Members of Indian Accounting Association, Faculty Members and Researchers from all over the world , Ladies and Gentlemen, Good morning to all of you. I am very happy to be part of the 4th International Multi-Disciplinary Conference on Transition and the Transformation in 3rd millennium. I would like to thank Prof.Shiware and Prof.Chitra for inviting me to deliver the key note address. I am happy to know that in this conference, research papers relating to: i) Strategic Marketing and Planning ii) Business Ethics iii) CSR iv) Global Management v) HRM vi) Digital Strategies vii) Innovation viii) Empowering Women ix) Telecommunication, etc Will be presented. It is very heartening to note that more than 400 research papers were received from various parts of the world and am happy to see , many dignitaries have come from abroad to attend this conference. Am sure with these wide variety of subjects and perspectives, the participants including me will benefit a lot from the proceedings. The topic today is of utmost relevance in the context of continued disruptions and uncertainty in the Economy. The advancements in the first 17 years of the 3rd millennium are breath taking. We are living in an age where continued disruption, uncertainty, volatility, complexity and ambiguity are part of our daily life. The advancement in recent past is much larger than the advancement witnessed in the earlier few thousand years in the past. Few hundred years ago China and India were the leading economics in the world. According to some sources, both countries had more than 50% of the world’s GDP. Later when Britain started expanding its operations globally, it became the leading economy in the world. Technology revolution catapulted USA to the leading position in the world. Afterwards, we witnessed the rise of Europe, Russia, Japan and South Korea. From 1980 onwards, China started growing fast and India started reporting higher growth after liberalisation. Then we started hearing Acronyms like BRICS, MENA, CIVET, etc. In 1980 , China and India were of the same size . The breath taking reforms undertaken by China and the fast growth it was able to sustain for many years have made China , a global power today. US and Europe and countries like Japan, Singapore and Hong Kong were contributing to the growth a few years ago. Even today, because of its large size, US contribution to the Incremental economic growth in the world is substantial. Since the growth potential in these countries have become less, the countries like China, India, Indonesia, Middle East and Arica have started growing fast. According to predictions for 2050 by various experts, China will be the leading economy with a GDP of about $ 50 trillion, followed by US at $ 36 to 40 trn and India $ 27 to 30 trn. Indonesia will be the fourth largest economy in the world. In the next 2/3 years, India will become the country with the maximum population in the world. It has the largest number of youth in the world. The largest number of entrepreneurs in the world are living in India. We create the maximum number of entrepreneurs in a year in the world. As per the forecast by all the leading financial institutions and Economists through out world, India will continue to grow at a rate of more than 7% p.a. for many more years. The high growth will create many opportunities for people from across the society. The path to the growth is paved with lot of challenges. Indian society had gone through a fast transformation in the last few years. From total dependence on Agriculture and rural areas, the growth has shifted to services, manufacturing and cities. Despite, the level of urbanisation is only at 32%, what we find today is that lot of developments taking place in villages also. They are being provided with electricity, water, road connectivity, media and digital connectivity. The penetration of mobile phones in rural areas is taking information to every nook and corner of the country. The concept of joint family is giving way to nuclear families. In a family, many go to work, resulting in multiple income and high earning capacity. People have started spending money and India has become one of the high consumption economies in the world today. The entry of e-commerce players has increased the consumption level. Unlike in the past, today people spend lot of money on Education, Health , Leisure, Entertainment and Travel. In an Economic Growth model, the growth of an economy is initially dominated by Agriculture and then manufacturing picks up. Finally, the services takes the dominant position. In the case of India, even without creating a big manufacturing base, the initial fast growth was supported by services. As the services grew, it gained its share from Agriculture in proportion to the lost share of Agriculture. Whereas the share of industry and manufacturing remained at the same level for many years. The fast growth in services was mainly supported by Trade. India has got one of the largest and deepest Retail systems in the world. There are six levels of trade before it reaches the final customer. At the retail level itself there are more than 15 million establishments. If we take the other six levels, it adds up to a lot in terms of number of entrepreneurs. This has created lot of business and entrepreneurial opportunities in India. Most of the jobs in India are created in the unorgainsed sector and too in the area of trade. At the global level, India becoming the leading country in the world for IT outsourcing , has created many businesses in the area of services. An entire eco system of businesses has been created around IT and ITES. Whereas China’s growth strategy was anchored on manufacturing. With the low cost of all factors of production, China was able to become the manufacturing hub for the world. Now China wants to build its service sector and aspires to compete with India , in services. If India has to grow at more than 7% p.a and the fast growth has to be sustained, manufacturing has to be developed. The share of manufacturing in our economy is only 16% and the Government has formulated a programme“Make in India” to increase the share of manufacturing share to 25% of GDP. 25 thrust sectors have been identified for increasing the share of manufacturing in GDP. To achieve this objective lot of skills are required. When there is availability of lot of people for work, there is also a big demand for specific skills to develop industries. Realising this need, Government has created a Skill development programme to fill the gaps in the skills required. Skill development programmes are in place at the National, Regional, Local levels and the target is to train 500mn people in the next few years in more than 43 fields. To develop manufacturing, a conducive eco system needs to be developed. To address this issue ,National level Industrial corridors spanning across many states and industrial corridors within the states were identified and in the process of implementation. These initiatives will help to develop the industrial clusters and infrastructure required for industrial development. This will go a long way in accelerating the growth of manufacturing and the economy. Countries across the world have recognised the importance of fast economic growth. The ruling parties/rulers across the world , irrespective of the form of government , drawn up ambitious plans for the growth of their economies. They conduct road shows to attract investments into their countries. Political climate across the world is becoming business friendly and the culture has changed. Earlier , investors used to visit the government offices to obtain permits. Now, the Government authorities , visit , various countries in the world and inviting the investors to invest. In India every state Government has a plan to grow fast and each state conducts Road Shows/Investment meets to attract investments in the state. This will go a long way in increasing the competitiveness of states and formulation of robust economic growth strategies. Digitisation and Technology. The latest development in technology has created a lot of opportunities for growth but at the same time has destroyed several industries. The fast penetration of mobile technology has advanced the social/financial inclusion and today even a person living in a rural area can use a smart phone to read and receive a high quality content which is of global standard. The advancements in AI, IOT, VR and block chain are going to improve the productivity several times. At the same time, faster adoption of these technologies will destroy many jobs. Further , misuse of these technologies is threatening the privacy of individuals. The exploitation and profiteering is also a big threat. Cyber security has become one of the major areas of concern. The adoption of these technologies should be handled with great care and measured approach to adopting these technologies will ensure a balanced Economic Growth . To ensure a balanced development of any industry and an economy, regulation and regulatory agencies play a major role. As the world becomes more and more complex, new regulations have to be formulated and new regulatory authorities have to be created. The time taken and procedures to be adopted to adhere to regulations results in significant costs for an enterprise. Regulatory costs have become one of the major costs of doing business today. The adoption of new technologies / manufacturing techniques has resulted in degradation of the environment. Higher level of manufacturing will result in higher pollution. Now that , we have set a higher target for manufacturing, there is always a dilemma, which one should be given precedence over the other. The opportunities before us are accompanied by several challenges. Considering India has a large population, all our future economic strategies should be based on use of the available manpower. Considering the large number of work force, even a small improvement in productivity in India will lead to big gain. This is the moment for India. We have very good economic development programmes in India. By formulating workable implementation plans and effective implementation, India can regain the global leadership in the third millennium. To realise this dream, all the stake holders in the society should work together and Make India a leading force in the world. Thank you.

3^rd Millennium – Opportunities, Issues and Challenges

R.Kannan , Hinduja Group

International Research Conference conducted by Indian Accounting Association, University of Mumbai and Chadrabhan  Sharma College on 7^th April 2018 .

Hon’ble Member of Parliament, Shri Dr. Kirit Somaiyaji, Prof.Shiware, Prof Chitra Natarajan, Prof. Ashok Joshi,  Prof. Madhu Nair, Prof Pratima Singh, Members of Indian Accounting Association, Faculty  Members and Researchers from all over the world , Ladies and Gentlemen, Good morning to all of you.

I am very happy to be part of the 4^th International Multi-Disciplinary Conference on Transition and the Transformation in 3^rd millennium.  I would like to thank Prof.Shiware and Prof.Chitra for inviting me to deliver the key note address.

I am happy to know that in this conference, research papers relating to:

i)                    Strategic Marketing and Planning

ii)                   Business Ethics

iii)                 CSR

iv)                 Global Management

v)                  HRM

vi)                 Digital Strategies

vii)               Innovation

viii)              Empowering Women

ix)                 Telecommunication, etc

Will be presented. It is very heartening to note that more than 400 research papers were received from various parts of the world and am happy to see , many dignitaries have come from abroad to attend this conference.

Am sure with these wide variety of subjects and perspectives, the participants including me will benefit a lot from the proceedings. The topic today is of utmost relevance in the context of continued disruptions and uncertainty in the Economy.

The advancements in the first 17 years of the 3rd  millennium are breath taking.  We are living in an age where continued disruption, uncertainty, volatility, complexity and ambiguity are part of our daily life. The advancement in recent past is much larger than the advancement witnessed in the earlier few thousand years in the past.

Few hundred years ago China and India were the leading economics in the world. According to some sources, both countries had more than 50% of the world’s GDP.

Later when Britain started expanding its operations globally, it became the leading economy in the world. Technology revolution catapulted USA to the leading position in the world. Afterwards, we witnessed the rise of Europe, Russia, Japan and South Korea.

From 1980 onwards, China started growing fast and India started reporting higher growth after liberalisation. Then we started hearing Acronyms like BRICS, MENA, CIVET, etc. In 1980 , China and India were of the same size  .  The breath taking reforms undertaken by China and the fast growth it was able to sustain for many years have made China , a global power today.

US and Europe and countries like Japan, Singapore and Hong Kong were contributing to the growth a few years ago. Even today, because of its large size, US contribution to the Incremental economic growth in the world is substantial. Since the growth potential in these countries have become less, the countries like China, India, Indonesia, Middle East and Arica have started growing fast.

According to predictions for 2050 by various experts, China will be the leading economy with a GDP of about $ 50 trillion, followed by US at $ 36 to 40 trn and India $ 27 to 30 trn. Indonesia will be the fourth largest economy in the world.

In the next 2/3 years, India will become the country with the maximum population in the world. It has the largest number of youth  in the world. The largest number of entrepreneurs in the world are living in India. We create  the maximum number of entrepreneurs in a year  in the world.

As per the forecast by all the leading financial institutions and Economists through out world, India will continue to grow at a rate of more than 7% p.a. for many more years. The high growth will create many opportunities for people from across the society. The path to the growth is paved with lot of challenges.

Indian society had gone through a fast transformation in the last few years. From total dependence on Agriculture and rural areas, the growth has shifted to services, manufacturing and cities. Despite, the level of urbanisation is only at 32%, what we find today is that lot of developments taking place in villages also. They are being provided with electricity, water, road connectivity, media and digital connectivity. The penetration of mobile phones in rural areas is taking information to every nook and corner of the country. 

The concept of joint family is giving way to nuclear families. In a family, many go to work, resulting in multiple income and high earning capacity. People have started spending money and India has become one of the high consumption economies in the world today.

The entry of e-commerce players has increased the consumption level.  Unlike in the past, today people spend lot of money on Education, Health , Leisure, Entertainment and Travel.

In an Economic Growth model, the growth of an economy is initially dominated by Agriculture and then manufacturing picks up. Finally, the services takes the dominant position. In the case of India, even without creating a big manufacturing base, the initial fast growth was supported by services. As the services grew, it gained its share from Agriculture in proportion to the lost share of  Agriculture. Whereas the share of industry and manufacturing remained at the same level for many years.

The fast growth in services was mainly supported by Trade. India has got one of the largest and deepest Retail systems in the world. There are six levels of trade before it reaches the final customer. At the retail level itself there are more than 15 million establishments. If we take the other six levels, it adds up to a lot in terms of number of entrepreneurs. This has created lot of business and entrepreneurial opportunities in India. Most of the jobs in India are created in the unorgainsed sector and too in the area of trade. 

At the global level, India becoming the leading country in the world for IT outsourcing , has created many businesses in the area of services. An entire eco system of businesses has been created around IT and ITES.

Whereas China’s growth strategy was anchored on manufacturing. With the low cost of all factors of production, China was able to become the manufacturing hub for the world. Now China wants to build its service sector and aspires to compete with India , in services.

If India has to grow at more than 7% p.a and the fast growth has to be sustained, manufacturing has to be developed. The share of manufacturing in our economy is only 16% and the Government has formulated a programme“Make in India” to increase the share of manufacturing share to 25% of GDP.  25 thrust sectors have been identified for increasing the share of manufacturing in GDP.

To achieve this objective lot of skills are required. When there is availability of lot of people for work, there  is also a big demand for specific skills to develop industries. Realising this need, Government has created a Skill development programme to fill the gaps in the skills required. Skill development programmes are in place at the National, Regional, Local levels and the target is to train 500mn people in the next few years  in more than  43 fields.

To develop manufacturing, a conducive eco system needs to be developed. To address this issue ,National level Industrial corridors spanning  across many  states and industrial corridors  within the  states were identified and in the process of implementation. These initiatives will help to develop the industrial clusters and infrastructure required for industrial development. This  will go a long way in accelerating the growth of manufacturing and  the economy.

Countries across the world have recognised the importance of fast economic growth. The ruling parties/rulers across the world , irrespective of the form of government ,  drawn up ambitious plans for the growth of their economies. They conduct road shows to attract investments into their countries.

Political climate across the world is becoming business friendly and the culture has changed. Earlier , investors used to visit the government offices to obtain permits. Now, the Government authorities , visit , various countries in the world and inviting the investors to invest.

In India every state Government has a plan to grow fast and each state conducts Road Shows/Investment meets to attract investments in the state. This will go a long way in increasing the competitiveness of states and formulation of  robust economic growth strategies.

Digitisation and Technology. The latest development in technology has created a lot of opportunities for growth but at the same time  has destroyed several industries. The fast penetration of mobile technology has advanced the social/financial inclusion and today even a person living in a rural area can use a smart phone to read and receive a high quality content which is of global standard. The advancements in AI, IOT, VR and block chain are going to improve the productivity several times.

At the same time, faster adoption of these technologies will destroy many jobs. Further , misuse of these technologies is threatening the privacy of individuals. The exploitation and profiteering is also a big threat. Cyber security has become one of the major areas of concern. The adoption of these technologies should be handled with great care and measured approach to adopting these technologies will ensure a balanced Economic Growth .

To ensure a balanced development of any industry and an economy, regulation and regulatory agencies play a major role. As the world becomes more and more complex, new regulations have to be formulated and new regulatory authorities have to be created. The time  taken and procedures to be adopted to adhere to regulations results in significant costs for an enterprise. Regulatory costs have become one of the major costs of doing business today.

The adoption of new technologies / manufacturing techniques has resulted in degradation of the environment. Higher level of manufacturing will result in higher pollution. Now that , we have set a higher target for manufacturing, there is always a dilemma, which one should be given precedence over the other.

The opportunities before us are accompanied by several challenges. Considering India has a large population, all our future economic strategies should be based on use of the available manpower. Considering the large number of work force, even a small improvement in productivity in India will lead to big gain. This is the moment for India. We have very good economic development programmes in India. By formulating workable implementation plans and effective implementation, India can regain the global leadership in the third millennium. To realise this dream, all the stake holders in the society should work together and Make India  a leading force in the world.

Thank you.

FDI in India

FDI – Astute Conduit for Trade Integration and Sustainable development – 2nd March

Keynote Speech Delivered in the International Conference on FDI Held by Department of International Business, Alagappa University.

R.Kannan, Hinduja Group

Shri. Prof. Subbiah, the Honble Vice Chancellor of the Alagappa  University, Shri.Karunakaran, Secretary to Government of Tamil Nadu, Dr. Narayana Murthy, Member of the Syndicate, Prof. Guru Mallesh Prabhu, Registrar of the University, Prof. Manickavasagam, Dean , Faculty of Management, Prof. UthayaSuryan, Prof.Muthuswamy, Ladies and Gentlemen, Good morning to all of you.

Indian Economy plays a major role in the growth of the world Economy today. Investors across the world are interested in investing in India . In the last four years, the FDI received by India crossed $ 200 bn. The interest of international investors in India is increasing and in Conferences organised by various states, Foreign Investors are committing billions and billions Dollars of investments in the states.

In this context, Department of International Business , Alagappa University is conducting an international conference on FDI, Trade Integration and Sustainable Development. In these two days, apart from the Speakers from Other countries, Experts from India are also participating. Several paper presentations were scheduled during this conference.

I am happy to be part of the programme and look forward to learn new concepts and perspectives on FDI . Am sure , all the participants will benefit a lot from the proceedings.

I would like to Congratulate Department of International Business, Algapppa University in Choosing this important Subject for the Conference and  wish the Seminar a great Success.

Global Economy

Global growth outlook is benign and augurs well for India, particularly for its export prospects. Both the IMF and the World Bank note a tangible improvement in the growth prospects of the US, the Euro Area and Japan. As per the World Bank (Global Economic Prospects, January 2018), global growth is estimated to pick up from 2.4% in 2016 to 3% in 2017 and further to 3.1% in 2018. This recovery is broad-based and largely attributable to a rebound in global investment. Growth in advanced economies is projected to moderate during 2019-20 while that in emerging market and developing economies (EMDEs) is expected to increase further to 4.5% in 2018 and average at 4.7% in 2019-2020. In the Euro area, growth is estimated to improve to 2.4% in 2017 with broad-based improvements across member countries supported by policy stimulus and strengthening external demand. In Japan, GDP growth is estimated to recover to 1.7% in 2017 supported by a recovery in consumer spending and investment as well as the implementation of a fiscal stimulus package but growth is projected to slow down to 1.3% in 2018 as fiscal stimulus is withdrawn and export growth moderates.

Global trade growth is expected to decelerate in 2018, to 4.3% from 4.6% in 2017. Reflecting the broad-based acceleration in the global economy, trade growth picked up in both OECD and non-OECD economies in 2017. According to the Netherlands Bureau for Economic Policy Analysis, export growth was especially strong from emerging markets—where exports grew by 4.8% year on year in January to November, compared with 3.8% export growth in advanced economies. Despite the global economy seeing continued strength in 2018, the global trade growth is expected to slow modestly in line with a deceleration in China's economy, given its outsized role in global supply chains. It is expected that  the authorities' move in 2017 to tighten credit conditions to have a lagged impact on investment and consumption growth in 2018, particularly as regulators tighten controls over household loans.

Indian Economy :

India’s growth prospects have become stronger both in the short and the medium term. Last quarter, the Economy grew by more than 7% , again , becoming the fastest growing Major Economy in the world.  The World Bank has projected India’s growth in FY19 at 7.3% and IMF has projected it to be 7.4%. . The opportunity for India re-emerging as a major contributor for global growth and sustaining this position for many years is the prediction by the leading Economists in the World. India will continue to do well and contribute to the Global Economic growth in the coming years.

Global FDI :

Global flows of foreign direct investment (FDI) had fallen by 16% in 2017 to an estimated US$ 1.52 trillion, from a revised US$ 1.81 trillion in 2016. While FDI in developing countries remained at a level similar to the previous year, more investment in sectors that can contribute to the Sustainable Development Goals is still badly needed. Promoting FDI for sustainable development remains a challenge. FDI to developed countries slumped by (minus) 27%, inflows into developing countries remained stable, at an estimated US$ 653 billion, 2% more than the previous year. Flows rose marginally in developing Asia and Latin America and the Caribbean, and remained flat in Africa. Developing Asia regained its position as the largest FDI recipient region in the world, followed by the European Union and North America.

After three years of growth, cross-border mergers and acquisitions declined in 2017. Their growth had already slowed in 2016, and they went on to contract by 23% in 2017, to US$ 666 billion. However, this still represented the third-highest level since 2007.

FDI to Developing Economies remained Stable at $653 bn, 2% more than the previous year. FDI to transition Economies declined by 17% to $ 55bn. Value of announced Green field projects showed a decline of 32% to $ 571 bn. The number of projects declined by 17%. In developing countries , project values announced halved.

The tax reforms announced by FDI are likely to affect the investment decisions announced by US MNEs, with consequences for global investment patterns. I was attending a meeting on SelectUSAsummit day before yesterday in Mumbai, where US officials want more investments into US from India. At present FDI from India in US stands at $ 12 bn. They feel this can be multiplied several times. They say, they regained their competitiveness through lowered energy costs which off sets the lower cost of labour in China. They had prepared an ambitious plan to revive their manufacturing sector.

In 2017, inflows to US reduced due to reduced inflows from a number of offshore financial centres.  In UK, inflows declined by 90% due to the uncertainty created by Brexit.

Higher economic growth projections, trade volumes and commodity prices would point to a potential increase in global FDI in 2018. However, elevated geopolitical risks and policy uncertainty could have an impact on the scale and contours of any FDI recovery in 2018. In addition, tax reforms in the United States are likely to significantly affect investment decisions by US multinationals, with consequences for global investment patterns.

India FDI

From the year Apr 2000 to Sep 2017 , for which the data is available, India attracted FDI of $ 518 bn including Equity flows, Re-invested earnings and other capital. The FDI equity Inflows alone amounted $ 353.34 bn. In the first six months of this fiscal $ 21.62 bn was received as FDI, which was 17% higher than the previous year. This was a very good growth considering the lower growth for other countries.

The countries which have the leading share in investment of FDI in India in the last 17 years  include ; Mauritius 34%, Singapore 17%, Japan 7%, UK 7%, Netherlands 6% and USA 6%.

The sectors which have received the maximum FDI include , Services sector 17%, Telecom 8%, Computer Software 8%, Construction Development 7%, Automobile 7%.

The States which received the maximum FDI were : Maharashtra 31%, New Delhi 20%,Karnataka 8%, TN&Pondy 7% and Gujarat 5%. Now the states including UP, AP and Telengana are attracting lot of FDI.

Factors Favouring High FDI in India

India will continue to attract very high FDI due to the following reasons.

1.      High Economic growth. All the leading agencies in the world predict that Indian Economy will continue to grow at more than 7% in the coming years and this will exceed Chinas growth rate. High Economic growth rate provides opportunities for high sectoral growth rates.

2.      Rapid Urbanistion of Metros, Cities and even Rural Areas. Due to digitization and penetration of mobile and data services is enabling transformation of Metros, Cities and Villages. Apart from Agriculture, several other opportunities have arisen on account of Digital Revolution.

3. Ambitious development  targets set by the Government for various infrastructure Sectors. The Central Government and State Governments had drawn up ambitious projects in the areas of, Industrial Corridors ( Centre and States ) ,  Smart cities , Port Development, Railways Development, Road Development, Affordable housing Development. This has attracted the interest of Several countries around the world.
4. Manufacturing Mission. India wants to increase the share of Manufacturing from 16% in GDP to 25% in GDP. With this in view, detailed strategies to develop 25 sectors under Make in India Mission were formulated and in the process of implementation.
5. Apart from that Several programmes like Start Up India, doubling Farmers Income, Digitising the nation and several well defined and well thought out development programmes were introduced by the  Government to increase the GDP growth.
6. Now Commerce Ministry has drawn up a plan to look at Industrial Development from Each Districts perspective and District wise Industrial Developments plan would be made.
7. Liberalisation of FDI. The government has lineralised many sectors for FDI. In many sectors today, 100% FDI is allowed. This has attracted the interest of investors across the world.
8. DIPP under the Ministry of Commerce has an Agency called invest India, whose main role to attract investments into India. They have a detailed database of opportunities for investment in India, which foreign investor can use. The data base is organized in terms of Opportunities in States, Sectors and Sub Sectors. There are expert desks created for different countries. In international investments, one of the issue is , availability of information. The Agency plays a major role in facilitating investments.
9. Introduction of  good governance system by government through new regulatory agencies. Indias regulatory agencies are highly regarded by others in the world. When the whole world was under stress, due to prudential policies developed by the agencies, India withstood the global melt down. New agencies were created in many sectors today. This protects the investors as well as customers. This enables a fair competition.
10. Emergence of Several Globally competitive Businesses. In the initial years, only Textile was globally competitive. Now we have many sectors, which are globally competitive. The sectors which have become globally competitive include Automobiles,Telecom, Chemicals, pharma, IT, Gems and Jewellery, R&D, etc. Several more industries will become competitive as we go forward.
11. When large investments are made, it should give good returns. In India, several sectors are profitable because of the large population we have and the large volumes it provide. This is one of the reasons for India’s attractiveness in the Global Scenario. Apart from the large Size, Constant movement of people to higher categories of income from one category at  all levels, creates demand for products at various price points.There is also an increasing propensity to spend  by  people.
12. Competition between States.  Every state in India has drawn up a plan to grow by more than 10%. Every year, they have started holding investment meets where they invite investors from all over the world. In these conferences, the investment opportunities are show cased and MOUs are signed with the potential investors. They sign MOUs with both Indian and Global Companies to increase the investments in the states.
13. Increased  Foreign Investor Interest in  India and India sectors. Considering the big potential for growth, Investors around the world are coming to India and exploring the scope for investments. In the last year, I had met more than 60 Foreign Delegations , which had shown interest in Investment in India. But one concern today is due to increased protectionism, every country wants investments in their own country. This is not going to affect the investments into India.
14. Role of Government AID Agencies /Pension Funds / Mutual Funds and Sovereign Wealth Funds. Japanese Government Agency, JICA in collaboration with JBIC has provided lot of funds projects in Infrastructure sector. Canadian Pension funds in India have invested more than$ 10 bn. Abudhabi SWF has decided to invest $ 1 bn in the  Infrastructure Finance Arm of the Government. There is lot of low yielding funds across the world have to be deployed in attractive investment opportunities and India provides a good scope for deployment of these funds.
15. Part of the Global Value Chain. India has become a part of the Global Value chain in many sectors and many MNEs have set up a part of their operations in India or adopting a strategy of outsourcing from India.
16. Ease of Doing business. India is one of the countries where ease of doing business is within top 10 in the world as reported by AT Kearney FDI investment Index. India ranks 7^th in the Index. If result oriented indicators like Economic growth rate, Growth rate of different industries, profitability, Ease of obtaining finance and number of entrepreneurs created every year , India’s rank should be in top 5. This is one of the reasons, why FDI investments are increasing in India faster than other countries in the world.

India has got one of the highest savings rate in the world. At 30% of GDP and on $ 2.5 trn, our savings in a year amounts to more than $ 750 bn a year.   All of our future investment needs could be met from only domestic sources. But investment pattern of savings is biased towards investment in Real estate and Gold. Accumulated savings in India is very high , which makes India a very strong country for investments.

In Conclusion, India has a highly favourable Eco system for   investments and other countries can not ignore India’s attractiveness and MNEs around the world should look at India for their global growth . The MNEs in India, should draw up aggressive plans for growth in the Indian market and invest more in India. Indian companies should have more participation in global value chains and more Indian companies should go global and manufacture products in India to serve global markets. .Thank you.

 
  

NPA article in Moneycontrol in May 2017

May 18, 2017 12:13 PM IST | Source: Moneycontrol.com

NPA ordinance – An innovative approach to faster resolution

Any delay in resolution reduces the value of assets, increases the cost and keep the capital locked for a long time.

   

R Kannan 

Global Economy is yet to regain the normal after the 2008 economic crisis. Banking system across the world was affected by the global melt down and the Non-Performing Assets (NPA) in many countries in the world witnessed a sharp rise from 2008. The economies across the world are still pursuing the path of recovery.

In the last few years, Indian Economy’s integration into the world economy intensified and 2008 crisis also had an impact on Indian Economy and its performance. This has affected the banks in both Public and Private Sectors. Since lending by Public Sector was more to the sensitive sectors, Public Sector’s NPA level was much higher than the norms.

To strengthen the banking system and to increase the transparency levels, RBI brought new rules on provisioning and the banks have to provide higher provisioning compared to the earlier norms. Adopting this new rule resulted in reclassification and higher provisioning by banks for Non-performing assets.

·          

Considering the India’s high economic growth, the sectors affected will see an upturn in the coming years and will return to black. In India, many mechanisms are available for resolution of NPA’s and Government and RBI are bringing innovative approaches to resolve NPA’s from time to time.

One of the issues for faster resolution of NPA’s was the fear of future investigation on resolutions arrived with the borrowers. The other was the way the Joint Lender Forum meetings were held and the decision taken in these forums. This was a slow process and this resulted in funds being locked up and not earning any income for the Banks.

The Government’s decision to give powers to RBI to arrive at resolution in individual cases is an innovative solution. RBI also relaxed the conditions for decision making at the JLF meetings. The Advantages of RBI taking the lead are -

a)The time taken for resolution will come down

b) RBI has the information about all the borrowers in all the banks and it is easy to consolidate and arrive at a single view of a borrower’s total borrowings with credit history.

c) When JLF meetings takes place, there is an independent body looking at the issue brings a fresh perspective.

d) Being the Regulator, It will be easy for RBI to coordinate with other resolution bodies in India; use their expertise, ascertain their views and bring in a 360 degree approach to resolve the problem.

e) The decision will be a joint one, where even RBI will be involved. In case of large borrowers, RBI can take the opinion of the Government also. This will bring comfort to decision makers in banks and they can decisions on resolution without the fear of future investigations.

Doubts are being raised about the effectiveness of this mechanism and how the judiciary will look at this process. In any such situations, where NPAs are very high, faster resolution increases the chance of higher recovery. Any delay in resolution reduces the value of assets, increases the cost and keep the capital locked for a long time.

Since the purpose of the mechanism is to expedite the resolution and release funds into the system, RBI’s role will be a catalytic one and collective decision of all concerned should be looked at with very positive approach by all concerned.

In Indian banking system, most of the lending is asset backed and in many cases, the borrowers are having large land banks and assets and they can cover the principal. In many cases, it would be possible to even recover 90 percent outstanding, when companies are owning lot of assets. In 2000, China had a NPA which was very large and they were able to bring the NPA’s from 40 percent of lending to respectable level today.

Doubts are being raised about, who will be the buyers of the assets on Sale. The leading Cash rich companies in each sector, Sovereign Wealth Funds, Pension Funds, Foreign companies, Foreign Investors, NRI’s are all waiting for opportunity to invest in India. Considering that India will grow at more than 7 percent every year, in the next few years and the likely increase in GDP growth on account of demonetisation and GST, investors are very bullish in India. The high GDP growth itself will aid in reducing the NPA.

Most of the Indian banks now focus on Retail customers, where the scope for large NPA’s is limited. Further the development of Indian Bond market and introduction of INVITs and REIT’s is going to help in reducing the future NPA. Most of the sensitive sectors, will use other funding channels / new financial instruments for executing their projects in future. Through further capitalisation of banks and higher growth in Banking, the NPAs will be back to normal level in two to three years.

Author is Head Corporate Performance Management at Hinduja Group

GST article in Business Today

GST impact: Business class can't avoid paying taxes; prices of most consumer items to come down

R.Kannan   New Delhi     Last Updated: July 7, 2017  | 08:24 IST

The Goods and Services Tax (GST) is a path-breaking change in the world's tax system. This type of large change was not effected in any part of the world earlier. The system will take two-three years to stabilise. In the beginning, there will be a lot of issues and several stakeholders, including state governments and industry associations, are not certain about the effects of GST on their finances and business models. Once it is introduced, there will be several changes in rates and classifications of commodities and services. The government has already set up an organisation to address the teething problems regarding GST.

Impact on the economy

GST is likely to bring many of the entrepreneurs, who are not paying taxes today, under the tax net and increase the government's revenue. Further, the transactions happening in the parallel economy will be captured in official statistics, resulting in higher GDP. It will increase tax collections and reduce the budget deficit, and the government will be able to spend more on economic development.

In the financial year 2016/17, services constituted 53.8 per cent of the Gross Value Added (GVA). Now, an increase in service taxes by 3 per cent will see an increase by Rs 40,000 crore. With an expected 10 per cent growth in services within the economy, service tax collections alone can go up to Rs 75,000-1,00,000 crore, a very large increase over the previous year. The cost of services provided by banks and non-banking financial companies (NBFCs), telecom companies and housing societies will also go up. There will be an increase in cost to the customers.

Impact on the consumers

In more than 50 per cent consumer goods, the cost is likely to come down. In case of services availed by the consumers like telecom, banking, financial Services, online shopping, insurance, eating out, airline travel and housing society, charges will go up. Consumers will have to brace themselves to pay higher bills for services availed. Since there is no pass through for fuel, they are likely to remain the same. Television, movie tickets, processed food and cement are likely to become cheaper. Car buyers can rejoice as the mid-segment cars will be neutral under GST. Small cars are likely to become cheaper. However, luxury or SUV cars are set to become expensive. Wherever the manufacturers see reduction in costs, they have to pass on to the consumer under the anti profiteering rule. Overall, the customer should see a net gain.

What it means for large corporate houses

As an anti-profiteering provision has been made, large companies have to pass on the saving in any of the costs due to the introduction of GST. In case the costs go up due to supply chains not being ready with GST registrations and filings, the costs will either have to be absorbed or have to be passed on to customers. However, no corporate can increase profits on account of GST. In the next three to six months, due to the uncertainty in demand and change in distribution models, inventory is likely to go up, and the working capital requirement is set to rise, which is expected to increase the cost of funds.

Several companies have availed investment benefits, which were for a 10-20 year period, and it is not clear how the transfer of benefits under the new system will pan out.

Will SMEs suffer?

Small and medium businesses have also been brought under GST. Here, the tax will be uniform for all and it will increase cost at the point of supply. As all transactions will be captured in the GST regime, it will have an effect on additional tax collections under the income tax. According to a provision, if the turnover is less than Rs 20 lakh per annum, there is no need for registration and payment of GST. However, many small companies are suppliers to large companies, and they have to register under GST if they want to continue with it.

Today, the distribution of goods is organised in sync with the rates asked by the states and the warehouses. As the rates will be synchronised now, there will be no need to keep so many clearing and forwarding (C&F) agents across the states, and warehousing and distribution could be optimised. This move will lead to consolidation of fragmented industries, and many small and medium industries will have to be consolidated.

In the short run, there will be a lot of issues and the small and medium enterprises will require guidance from the government and large buyers. In the long run, GST would be beneficial for all stakeholders, and it will be good for India's economic growth.

R. Kannan is Head of Corporate Performance Monitoring and Research, Hinduja Group

Hidden Strengths of Public Sector Units ( PSUs) in India

PSUs in India have played a major role in building the Indian Economy and the Industrial Development in India. After the Industrial Policy of 1956, many new PSUs were created in India serving the strategic needs and forming the base for Industrial Development. In each of the PSU in the sector , the PSUs emerged as  leaders in the  sector.

After opening of the Economy in 1991 and emergence of competition, many of the leading PSU’s lost their charm and started making losses. They had lost their leadership position and became marginal in the sectors they were the leaders.

Even today, some of the units are able to maintain the market leadership and operate very successfully keeping their competitiveness alive. PSUs including the loss making ones have lot of hidden advantages and their intrinsic value is much higher than the accumulated losses and there is a good scope for turning around them.

1. Land Bank. Most of the PSUs have land banks in leading cities in India and their value far exceeds their book value. Some times, the value could be even more than 10 to 20 times of their book value. Capitalising the land bank by sale, lease and joint development will provide the required competitiveness going forward. The concepts of REIT’s and Invit’s could be explored. In case of sick units, the land bank could be capitalised, the loans repaid and there will be scope for payment of dividend and meeting employee liabilities. Some of the PSUs sitting on huge land include Railways, BSNL,MTNL and the leading Public Sector banks.
2. Assets at low historical costs. In many cases, the equipments are in operations ,even after the economic life is over. The assets are reported at historical costs. Their replacement value and market value are much higher than the value in the books. Even after incurring high maintenance expenses, still they are able to produce products which are much cheaper than others.
3. Social Infrastructure / Town Development / Social Development. The PSUs in many cases are mega enterprises. While they were being formed about one third of their investments were towards , development of town around factories, schools, colleges , hospitals. Apart from serving the commercial objectives , they also served the social and economic development objectives. They have good experience in managing townships , social infrastructure and played a key role in development of towns and communities.
4. High quality Talent. PSUs pay one of the highest salaries, in the sectors they operate today. The selection process in PSUs is very good and through competitive examination, they were able to attract very good talent. Once, they are in the system, the continuing education is given lot of importance and the personnel are deputed to attend the world renowned courses in the sector.  Whenever Private sector have requirements for high quality personnel, PSUs become the hunting ground.
5. Wide distribution network. The consumer facing PSUs have the largest distribution network in the sectors they operate. Competitiveness of an enterprise is determined by the reach a corporate has. The network can be effectively utilised for cross sale of products of other PSUs and the complementary products from other corporates. This can help to earn fee based income using the distribution network.
6. Transparent accounts. PSU accounts are subjected to audit at various levels and various stake holders are involved in close scrutiny of the operations. The accounts reflect the real financial status of companies. There is no incentive , even to hide losses.
7. Technology. PSUs are the first movers in technology adoption and in India, most of the spending on Hardware, Software and R&D happens in PSUs. As a result , they have some of the good technologies. Companies like HAL, NTPC, BHEL ,etc are known for good technologies.
8. Systems and Procedures . They have very good well defined systems and procedures. Starting from preparing a Perspective Plan, they prepare Corporate Plans and Annual Plans and budgets for many years now.
9. Engagement of leading Management Consultants. PSUs have taken the help of leading management consultants in the World, to prepare their growth strategies and they get the best inputs for preparing robust growth plans.
10. Capital expenditure. Even during the Crisis, the Capital expenditure was happening only in PSUs. Most of the mega  projects valued at thousands of crores are executed by PSUs. This also helped in maintaining the GDP growth rate.
11. Large dividends. Government being the largest shareholder or sole shareholder of PSUs, the dividend declared by PSUs has emerged as one of the major sources of revenue for the Government. The oil PSUs also pay huge taxes and help generate income for the government.
12. Government backing. They have a strong share holder, the Government, which can continue to support the new initiatives towards higher business growth.

In the light of the above, the PSUs which still have competitiveness , should draw up aggressive growth plans to preserve their competitiveness going forward in future. In others, scope for capitalising the above strengths to be explored. The PSUs having large land banks have to draw up a strategy based on capitalising the land bank without losing much time.

Considering the increased uncertainties in the Economic Environment, PSUs have a  role to play in stimulating the investments in the Economy and need to increase their competitiveness to become agile. This will happen through culture change and improving the decision making process. The response to the fast changes in the environment is the need of the hour. The best practices in Private sector in bringing good decision making process across PSUs and sharing best practices from best PSUs will go a long way in making the PSUs relevant in future.

India Union Budget F 18

India - Union Budget F18

The economic survey and Union budget proposals have brought a feel good factor to the economy after the deep impact of the demoentisation on the Economic performance of India.  There was an effort to address most affected segments of the society including Farmers, SME’s and various measures were announced to ensure the development of various sectors of the society.

The budget proposal has 10 distinct themes: Farmers; rural population; energizing youth; poor and underprivileged; infrastructure; financial sector; digital economy; public service; prudent fiscal management; and tax administration. Under each of this, detailed action plans have to be drawn up and implemented faster with close monitoring of implementation of these schemes.

A Consolidated outcome budget for all ministries has been created. Fiscal deficit for F18 is projected to be at 3.2% of GDP and Revenue deficit for F18 is projected at 1.9%. The targets set are indicating the tight fiscal management.

There is a need to get back to 8% GDP growth and regain the growth momentum. Despite, the projection for GDP in the budget is lower, there is always a scope to look at measures which can take our economic growth back to higher levels.

One of the strategies stated in the budget is to use the data collected from Demonetisation process to bring more assesses into tax net and increase the tax collected from the existing assesses.  Apart from using measures like VDS  other schemes and penalties, even by brining to the notice of assesses that from the data government has the knowledge of the income, communicating the same to assesses that they have to pay higher, the compliance of tax payment could be increased by several notches.

The demonetization itself has brought the effects, which would have been realized if the GST was implemented. Again, introducing GST in the proposed form, is likely to create uncertainty in the environment and making the formulation of plans by Corporates.

The time frame for implementation of GST is very short and there is a need to build capacity not only with corporates and even with suppliers to the large corporates. This is a mammoth task and the government has to increase its reliance on professional agencies for capacity building.

There is a Surplus liquidity in banking system now after demonetization and the Public sector banks require further huge capital. The allocation of Rs.10,000 for recapitalization is very less and the government has to consider allocation of at least Rs.25,000 cr, which would help to raise additional Rs.2,25,000 cr through other sources of funding.

There is a proposal in the budget to spend more in rural areas, especially for improving the productivity of the farms and creating employment opportunities in other areas. This is the need of the hour and under every crop, we should set an objective to reach the best productivity of the crop in the world. This would help to increase the growth in agriculture to at least 6% p.a.  Farmer credit fixed at record level of Rs10 trillion, will ensure adequate credit flow to underserved areas in India.

The Mission Antyodaya to bring 1 crore households of poverty is a good move and it will increase the consumption levels in the Rural economy.

It is heartening to note that , the allocation to the MGNREGA is at the record level of  Rs48,000 crore and the participation of women now at 55% compared to less than 50% in the previous year. This will also keep many families out of poverty line.

In India, education is one of the sectors which had contributed to the development of IT and high tech sectors in India. There is an emphasis on Education and plan to introduce  System of measuring annual learning outcomes, emphasis on science augurs well for skill development. Innovation fund for secondary education is again a good concept.

Realty. The decision to  give infrastructure status for Affordable housing and redefining the scope  to take carpet area of 30 Sq.m in four metros and 60 sq.m in other towns is a good proposal , which will give a fillip to housing development.

Infrastructure. Now the government has decided to look at Transport sector in an integrated manner and brought a concept of Railway tying up all other modes of transport would bring down the logistics costs. Total allocation to transport sector at Rs2 trillion.

Total capex and development expenditure of railways is planned at Rs1.31 trillion and lot of emphasis on  Passenger safety. The government will set up a Safety fund corpus . Railway lines of 3,500km will be commissioned compared to just 800 Km in the previous year. There is also a plan to list the Railway related PSU’s , which will provide additional funds from issue of shares to the public.

Roads . There is an  Allocation for national highways of Rs64,000 crore and the road development will increase the connectivity . There is also a plan to improve the rural connectivity in a big way.

Civil Aviation. Airports Authority of India Act to be amended to enable monetization of land resources. 

Foreign Investment Promotion Board (FIPB) to be abolished. This is a good move and it confirms the government’s intent to open more sectors for FDI. This will attract more investors from abroad.

PSU’s. There is a plan to  List PSUs which are not listed today and   to create integrated public sector oil major. PSUs have lot of assets and market value will be running into many trillion of Rupees. Capitalisation of land available with PSUs have to be taken up on priority basis.

SME’s. Under Pradhan Mantri Mudra Yojana: Lending target at Rs2.44 trillion. Already , lot of funds were disbursed under this scheme. Increasing the target, would help to support the growth of SMEs.

Digital Economy. The intent of the government is very good. But trends across the world indicate that even developed economies have high reliance on cash transactions to support the economic growth. In India , the major entrepreneurial class is from the Trading sector and their dependence of cash as a working capital is very high. Restricting the cash payment to Rs.3 lakhs will constrain the trading activities in Tier II, III, IV cities and rural areas. Further , we are still not fully ready with Cyber security infrastructure to execute transactions on a country wide basis. In the light of the above, in addition to promoting digital , even the cash economy requires support to keep our economic growth at high levels.

Political funding. Maximum amount of cash donation that can be received is Rs2,000, political parties can receive donations by cheques or digitally; amendment proposed to RBI Act to issue electoral bonds, every party has to file returns within specified time. This is a radical reform as far as electoral reforms and political reforms are concerned.

Personal income tax: Rate reduced to 5% for income bracket of Rs2.5-5 lakh, All other categories to get uniform benefit of Rs12,500 per person and there is a proposal to  levy surcharge on income bracket Rs50 lakh-Rs1 crore.

FPI category 1 and 2 investors exempted from indirect transfer provisions is a good proposal to keep the interest of foreign investors intact. As expected , the capital gain treatment changes which would have affected the confidence of foreign investors was avoided.

Concessional withholding rate will be extended to 30 June 2020 for ECB’s and  rupee-denominated Masala bonds. This will facilitate issue of ECB’s and Masala Bonds.

·         The Revised Estimate (RE) for Total receipts is Rs.19.33 trn, which was 0.92% lower than the Budgeted Estimate(BE) and it was higher than the previous year by 8.96%. The projection for F 18 is Rs.21.21 trn, a rise of 9.72% over the RE for F 17. The growth in revenues were lower than the Nominal growth in GDP. The projection for Receipts is also lower than the projected growth in Nominal GDP.

·         The RE for Gross tax revenue for F 17 was at Rs.17.03trn, higher than the budget estimate by 4.41% and 17.04% higher than the previous year. This was mainly on account of the VDS scheme and the additional receipts arising out of Demonetisation impact. The projection for F 18 is Rs.19.11 trn, a growth rate of 12.21% over RE of F17.

·         After the share with the states, the revised net tax revenues in F 17 was at Rs.10.88 trn ,  3.22% higher than the budget. It was higher than the previous year by 15.3%. The projection for F 18 is 12.27 trn, 12.27% higher .

·          Due to poor performance of corporates, the corporate taxes were same as the budgeted level at Rs.4.94trn. The assumption is that , it will rise by 8.83% YoY in F 17. Budget for F18 is at Rs.5.38 trn, a rise of about 9%. Partly, the lower growth projected is due to reducing the tax rate for SME’s from 30% to 25%.

·         Taxes on income was at Rs.3.53trn, same as the budgeted levels in F17. They had assumed an increase over the previous year by 23% in F 17. This has assumed a sharp rise of 25% in F18 at Rs.4.41 trn. They have factored in the addition of new assesses in the light of demonetisation impact. Through data mining and better administration, they are planning to increase the revenue from this source by 25%.

·         There was a talk about brining back the wealth tax. Since this will not be a large sum and collection cost of the taxes would be higher than receipts, wealth tax was not brought back .

·         In Customs, the revenue was lower than the budget by 5.65% at Rs.2.17trn and higher than the previous year 3.33%.  This was mainly on account of  lower trade growth in the world and the softening of import prices and export prices. The growth projected for F 18 is 12.9%, at Rs.2.45 trn. Since trend witnessed today is one of protectionism by many countries, there is a risk that , the growth projected of 12.9% may not come true. The rise in oil prices, will contribute to higher customs duties.

·         On Excise, they were planning to collect Rs.3.87 trn. against the BE of Rs.3.18 trn and  34.3% higher than the previous year. The high rise in excise duty was mainly on account of increased excise rates on petroleum products. When we had witnessed low prices in imported Petroleum products, all the savings was not passed on to the customers. The government retained part of the savings in the form of additional excise duty. In F 18, they expect Rs.4.07 trn, a rise of 5.16% over RE of F 17. Since , the oil prices started rising and likely to be firm in the coming year, the scope for mobilising additional excise duty from Oil is limited. There is no proposal to effect many changes to excise duties since GST will be implemented soon.

·         Service tax collection was higher than the budget by 6.9% at Rs.2.47trn. It was higher than the previous year by 17%. The projection for F 18 is Rs.2.75 trn, 11% higher than the previous year.

·         Revised Interest receipts by the government was lower than the previous year at Rs.28.5% at Rs.18149.03 cr in F 17 and it was  39% lower compared to the budget estimate of F17.Projection for F18 is at Rs.19020.73 cr. The growth expected on this count is only 4.7% over the previous year.

·         In F 17 , they had assumed receipt of dividend of Rs. 1.53trn and it was higher by 23.4% over BE.  This was higher than the F 16 by 36.6%. Dividends have contributed a significant share to the overall kitty.  If the amount of old currencies received by RBI were lower by Rs.2 trn as was expected, through special dividend, this could have been much higher in F 17. In F 18 the assumption is that Rs.1.42 trn, a fall of 7.19% over RE of F 17.

·         Other non tax revenues. This includes Sale of air waves and disinvestments. The revised plan for F 17 was Rs.1.61trn, 3.5% lower than the budget and 43.3% higher than the previous year. The budget for F 18 is Rs.1.25trn, 22% lower than the previous year.

·         They had assumed revised ,miscellaneous capital receipts of Rs.45500 cr, a shortfall of 19.4% over the F 17 budget and 8% higher than the previous year. Estimate for F18 is at Rs.72500 cr.59% rise over the last year. This is a significant increase.

·         Resources from   Market loans In F 17, it was lower than  BE by 18.3% and 14.1% lower than the previous year at Rs. 3.47 trn. In F 18, it is assumed to be same at Rs.3.48 trn.level. Revised Short term borrowings in F 17 was lower than F 16 by 63.2 % at Rs.18629 cr. It was higher than the budget by 11.89 %. The plan for F 18 is a reduction of 89.2% and the plan is to mobilise Rs.2002cr.

·         The government internal debt at the end of F 17 is likely to be Rs.57.31 trn and it is expected to rise to Rs.61.80 trn. External debt will rise from Rs.2.25 trn to Rs.2.40 trn.

·         Total liabilities of the government is expected to be Rs.74.40 trn at the end of F 17 and likely to rise to Rs.79.63 trn.

·         The revised amount raised through securities against  small savings in F 17 was higher than F 16  by 72.2% and budget by 309% at Rs.90376 cr. There is a plan to increase this to Rs.100157 cr , 10.8% higher than F 17. They have kept the borrowing to the lowest possible level and emphasis on loans as a major source of funding is less.

·         Other Capital receipts in F 17 was revised at Rs.9948cr . In F 18 , it is likely to be higher by 438% at Rs.53513 cr.

·         In the expense category, Central expenses were likely to rise to Rs.16.16trn.from BE of Rs.16.01 trn., 11.5% rise over the last year. Budget for F18 is at Rs.17.23 trn, a rise of 6.62%. The increase projected for expenses is very low indicating that, the government will rely on working closely with State Governments and private sector.

·         Expenses through transfer of funds in F 17 was revised to Rs.3.97 trn, 5% higher than the budget. It was higher than the last year by 16.4%.  There is an assumption of increase and this is expected to be at Rs.4.23trn in F  18. They do not expect a big benefit from DBT and direct transfer scheme as the reduction is not substantial.

·         Total Expenditure for F17 is revised at Rs.24.21 trn, 1.89% higher than the BE. It was higher than the previous year by 15.17%.  Estimate for F18 is kept at Rs. 25.32 trn, 4.58% higher than RE. This indicates, there has to be an austerity drive as far as expenses are concerned.

·         In terms of assets at the end of F 17, the value is likely to be Rs.21.38 trn and it is likely to rise to Rs.23.39 trn. From the details given for various categories, it appears that the value of assets of the government of very much undervalued and they are at historical costs. If the strategy of capitalising the assets and increasing the credit rating of the country, there is a need to revalue the assets closer to the market rates.