Deleveraging Government Balance Sheets

In many countries in the world today , the government borrowing has reached a level whereby more borrowings would put a strain on the economy and growth. In some countries, the borrowings had exceeded the acceptable limits and threatening the viability of the Economic systems. The accumulation of debt in many countries was accompanied by good growth. But when the growth slowed down and witnessed a flattening trend, the servicing of Government loans alone had consumed lot of resources generated by the government.

Reduction in interest rates as a part of the stimulus in the recent years, enabled governments to borrow funds at cheaper rates thereby reducing the pressure on account of high interest rates. But this trend cannot continue for a very long time and interest rates have to move up.

The countries which have high foreign debt have very high economic risks and the ones having high domestic debt are protected from high forex volatility. The ones having high domestic debt have high adaptability and flexibility and hence there is a need for countries to be careful when the foreign debt is being accumulated in the form of sovereign bonds and corporate debt.

Going forward, Governments across the world have to develop focussed debt management strategies and maintain the debt within the manageable levels and ensure orderly economic growth. There is a need to deleverage the balance sheets of the governments.

1. Achieve higher GDP growth through improved productivity of funds / resources. Since economic systems across the world had grown large and complex , there are many inefficiencies in the system. By focussing on productivity of resources, the need for capex by governments could be reduced, the surplus from deployment of assets would increase thereby reducing the need for large incremental debt funds for growth and service. The countries which have good economic growth rates will have an advantage in achieving this objective and reduce the need for borrowed funds and also the ratio of borrowed funds to the GDP could be held at healthy levels.

2. Maintain an inflation level of 3 – 4% p.a. Though inflation is a market determined variable in many countries , this is being controlled in many countries through government intervention and policies. The countries which are growing would be in a position to reduce the debt burden through inflation but there are many countries in the world which are having very low economic growth and low inflation and they would find it difficult to manage the debt and debt servicing.

3. Reduce the interest rates. This is the strategy being followed in the recent past whereby the governments  resort to very high borrowings, which did not result in high burden on interest servicing. Low interest rates make the loans affordable and repayment capacity is being enhanced.

4. Privatise the Government owned organisations. The role of government in initial phases of industrialisation was to establish the essential industries for Economic growth and in the present context , the government has to play a major role in orderly and stable economic growth. Since in many countries the level of industrialisation is very high, the need for government to invest in major industries is limited. The private sector in many countries are well developed and they will be in a better position to take over the so called essential industries. The governments can even look at disinvestment to the extent of 100% in the sectors where they are present and to reduce the forex loans, they could even invite foreign companies to take over the assets. This will generate funds .

5. Fund mobilisation. While raising funds, the governments could look at raising funds through the equity structure or equity type instruments, wherever the vehicles for raising resources are available. Only in case, the options for raising equity based funds are exhausted, the government could borrow through debt instruments.

6. Sources of funds. The emergence of capital markets offers many options for governments to raise funds through various sources. The options for raising funds could be based on the tenor of the funds available and the interest rates. The preference could be for sources from which concessional funding is available for long periods of time. The prioritisation of the sources based on similar criteria would enable orderly raising of debt.

7. Dividend. In many countries, still the government companies are one of the largest in their sectors and they continue to make good profits. The companies which make a very high surplus can pay generous dividends to the shareholders thereby, the governments also benefit through receipt of higher dividends.

8. Negotiate with Creditors for reduction of debt. In many instances, the countries had accumulated very high level of debt, which is not justified considering the size of the economy and repayment capacity. If the lenders and investors had made careful decisions , then the countries could have not accumulated large level of debt beyond their capacity to repay. The lenders , investors should have taken precautions and done the due diligence in investing in such instruments. Partly lenders are responsible for big debt accumulation. Hence, when it comes to debt restructuring, the lenders have to take a cut in valuation of their investments. Based on the future ability to repay, the country in distress would be able to extract a discount on the outstanding loans from the lenders.

9. Government Expenditure. In well developed and advanced countries where the growth potential is very low, the need for higher government expenditure is limited. In fact, the countries which have low potential need to look at improving the productivity of the resources and in line with the technological developments increase the productivity of the manpower and other resources. The non essential items and the ones with high cost implications in relation to the productivity could be considered for cost reduction. Manpower is one area which offers a very big scope for improvement in productivity. Subsidies is another area which offers lot of scope for reduction. Instead of providing subsidies, loans through directed lending by banks could support the targeted beneficiaries which will also help in creating enduring employment and sustainable businesses. The expenses on aid to other countries, defence and supporting new industries like renewable energy , offers scope for reduction of government expenditure.

10. Taxation. In many countries , when the tax rates were slashed, the revenue collection witnessed a multifold increase. The countries where the tax rates are very high, the tax compliance levels are very low. Some countries are in a very bad shape and there is a scope to  raise resources from those who are earning very high income . The countries where the residents had parked their income abroad without declaration, tax amnesties could be given and voluntary disclosure schemes could be introduced. Depending on the circumstance, the increase / reduction of tax could be looked at and voluntary disclosure schemes could be introduced.

11. In an initiative to create competitiveness, the countries allow currencies to depreciate. In the short term, it creates competitiveness but when the country relies on borrowed funds for growth especially through external borrowings, the depreciation of the currency leads to undesirable efforts in the long run . The value of external debt in relation to the borrowing country’s currency goes up. The strategy of achieving competitiveness should be approached with big caution to ensure that it is not going to  be a burden in terms of higher debt going forward.

12. Land. In high growth countries, the land in growing regions are in great demand and since Governments in many parts of the world were the early ones to set up industries, they own prime land in cities and growing regions. Governments also develop new centres of manufacturing and services. Sale of land can be a big source of funding for government which can reduce the need for debt. Many of the government companies which are in old industries, not doing well, own prime land and these companies can capitalise on the land to generate funds which could be given to the government in the form of dividends.

13. Looking at many countries balance sheets today, it appears that they would not be in a position to service even the existing debts. Adding more debts would worsen the situation making the economic viability of the country in jeopardy. In such cases, the scope for printing money without creating debt could be looked at. In the earlier post, I had discussed the criteria which could be looked at for creation of money without debt.

14. In many instances, governments have huge outstandings to be collected from other countries, corporates and individuals. The delay occurs due to many reasons including legal proceedings. The governments can identify action plans to collect the outstandings. Especially, the legal proceedings with Government departments and Government enterprises could be concluded through a separate mechanism to be created by governments. On the debt to be collected from corporates and individuals , action plans could be identified to collect the same.

15. There is a lot of cross border , mutual debt existing between countries. At the country level, an institution could be created for consolidating all the debt from within the country and from outside the country ( this could include even individual and corporate debt ) on country wide basis. The pooled debt through a process or through an international institution could be extinguished through a mutual process of consent. The foreign debt extinguished in the case of Individuals and Corporates could be substituted through local /domestic debt. This would help the Country to maintain good credit rating at the country level and help the borrowers from the country to obtain low rate of interests for foreign loans.

R.Kannan

Eurozone Exit – Cost Effective Solutions

The Eurozone was created with a view to achieve higher growth, leverage synergies , reduce the cost of trade and transactions. During the course of existence of Eurozone , many of the benefits accrued to member countries. But it also enabled countries with less financial resources to raise funds from the markets at very attractive rates. This has resulted in huge borrowing by member states without looking into the feasibility of  accumulating a large debt relative to the size of the economies.

After the global crisis and reduced Economic growth rates in these countries, the huge debt started threatening the viability of well established Economic systems. Creation of Euro zone did not result in consensus of political views or harmonisation of the Fiscal systems  across the countries in the Union. The flexibility of countries to adapt the monetary policy was lost. The interdependence on other countries and banks from other countries in the zone had increased. There is an immediate need for the member countries to stick to a common code for managing the finances and follow the austerity measures as required. Despite an urgent need for such measures, there is no support for following these measures in toto by Political parties and members from the society in the member countries.

The immediate economic growth prospects for many of the member countries are very bleak and measures were taken by IMF and ECB to provide stimulus to the economies. Whatever the measures being taken, the scope for achieving a positive growth for next two / three years for some of these countries looks very bleak. The countries have to accept the fact that there will be a negative growth for the next  two/ three  years and take measures to kick start the growth in the following years. The austerity measures are required. If they do not want to follow the common code, then it is going to affect the performance and prospects for the entire European Union and make the task of revival more difficult.

To provide flexibility and higher level of adaptability, it would be a  better option to allow the members to exit the zone. There are fears that the local currency would be devalued and it will create a systemic crisis which would be even worse than we had seen so far. The process could be made smooth and painless by  implementing the following action points.

1. Peg the currency to the Euro. ( Initially)  Allow a Exchange  variation of 0.5% against Euro from the previous day for every day. Cap the maximum variation of the currency for the whole year to 5% . At the max, the currency can depreciate or appreciate by 15.7% in three years. This will bring predictability and certainty to the investors.

2. Government / Central bank of the exiting country have to play a major role in controlling the inflation / deflation by closely monitoring the Demand / Supply of products and services.

3. On the day of exiting the Eurozone, convert all the external loans outstanding with lenders from outside to the local currency loans on par with the Euro. For one Euro – one Local currency could be given. The lenders benefit / lose as and when the Currency appreciation / depreciation takes place.

4. Continue the Aid programmes as planned by IMF and  ECB.

5. Reduce the Foreign Debt. Through Restructuring of the debt and debt reduction by negotiations . Extinguishing the cross balances of debt with other countries, banks from other countries and others. This strategy could be adopted for all the countries in the Eurozone by creating a mechanism whereby overall debt reduction could take place.

6. Bank Lending. Provide incentives for banks to lend . Set higher targets for  credit / deposit ratios . Focus on lending should be to create manufacturing industries and Entrepreneurs.

7. Since most of the banks are weak and require additional capital, the government has to induct more capital in to these banks.

8. Considering the poor immediate growth prospects, it would be difficult to achieve a viable economic model with the outstanding loans and the servicing costs of these loans. Hence, the country exiting the zone could be allowed to print money without creating Debt. This limit could be set at 25% of the total currency in circulation.

9. Prepare a comprehensive turn around plan for the country with a defined objective of increasing the competitiveness rank in three years. Identify the items imported which will not help to improve the productivity in the immediate future and reduce the import of these items to improve the trade balance.

10. Continue the free flow of resources with the  other Euro Zone countries.  The free flow of people, resources should be continued without any restrictions.

11. Focus on Manufacturing growth. Revive the old  industries and give incentives for setting up Small scale and Medium Scale industries. Develop county wide vocational training plans and give a big focus on vocational education on the similar lines of the practices adopted in Germany.

12. Develop the Tourism, Education and Services Sector. Create Specialised growth zones for these sectors. This will create lot of  employment.

13. Apart from focussing on creation of additional employment, formulate strategies for developing large number of entrepreneurs. This could be facilitated by National vocational training programmes. For example India has the largest number of entrepreneurs in retailing.

14. Government could guarantee all the deposits made in the banks. Since the currency is pegged to Euro, the flight of deposits to other countries could be reduced to a great extent.

15. Since the growth prospects in the immediate future is very bleak, there is an immediate need to put austerity measures in place. The government can identify all the non essential expenditure and postpone them by three years. The pension to the employees for three years can have a cap. There will be a reduction for those who are getting very high pension. Freeze the recruitment in the government. Freeze the salaries at the present level for two years.

16. Create new manufacturing zones. Announce fiscal incentives for large investments. Liberalise FDI rules. Open Most of the sectors for FDI.

17. Create a National Revival fund. Request the Wealthiest and those who are in high income bracket to liberally contribute to this fund.

18. The member exiting for all practical purposes to be treated as a part of the Euro zone even after exit and Status quo could continue in terms of Political, Economic and Trade relations. The only difference would be the flexibility of the exiting country to decide its monetary policy and the effects of the performance of the exiting country would not have any immediate bearing on the Eurozone as a whole.

R.Kannan

World Economy – Spillover from the financial crisis

The slowdown of economic growth in the US and Europeafter the financial crisis 2008-09 is an inevitable consequence of over-leveraged growth in the years before the crisis. The downward adjustment of asset prices, particularly in housing, and necessary fiscal adjustments create conditions which are not conducive for growth in the US and Europe in the medium term. This should come as no surprise as history has shown that after deep financial crises it took economies several years to recover to historic growth rates.

The expansive monetary policy of the US Fed as well as the European Central Bank (ECB) can only provide temporary relief, particularly for the ailing banking systems. In the medium term, the central banks will have to retreat from this extraordinary provision of liquidity to the markets and will have to mop up excess liquidity to avoid inflation. There is a discussion among economists as to the benefits and costs of those large liquidity operations. Notwithstanding the benefits in the short- to medium term with regard to the reassurance of financial markets and the low interest rates, there are considerable costs which have to be taken into account.

On a global scale, the revised risk perceptions of investors as to country risks has led to large inflows of liquidity into emerging markets with upward impacts on asset prices in real estate and equity markets as well as on emerging market currencies. What the Brazilian president Dilmah Rousseff has called a monetary tsunamiis putting severe pressure on the management capacity of central banks in emerging economies, walking on a tightrope between shoring up growth and containing inflation.

Furthermore, the international liquidity is clearly supporting the increase of commodity and food prices, with negative consequences for commodity importers and the poor in developing countries. An additional feature of global capital flows after the crisis has been their volatility, particularly affecting countries where economic fundamentals had not changed, but risk aversion of international, particularly European banks, has led to short-term disinvestment of capital from emerging markets for internal reasons of banks.

In Europe, the liquidity provision to European Banks and Southern European sovereigns through the Long-term refinancing operations (LTRO) of the ECB, as well as the financial firewalls in the Euro-Zone (EFSF, ESM), do help to calm the markets in the short term, but they provide only breathing space which has to be used by banks and governments to restructure. Without bold structural reforms particularly inSouthern Europe the liquidity provision will fail to reach its aims in the long run. There are indications, however, that weak governments as well as weak banks will not use the breathing space as required. Thus, the medium-term perspective for the Euro-Zone is not very positive, since there will be no return to normal market refinancing for some banks as well as for some sovereigns within the next 2-3 years.

For Asia all this is a clear case for gaining more resilience with regard to global capital flows by further developing domestic and regional financial markets. It is also a case for strengthening the intermediation of Asian savings into domestic and global investments by an ever stronger financial sector in Asia.

Dr. Peter Wolff
Head of Department "World Economy and Development Financing"
Leiter der Abteilung "Weltwirtschaft und Entwicklungsfinanzierung"

DEUTSCHES INSTITUT FÜR ENTWICKLUNGSPOLITIK (DIE)
German Development Institute - Institute Allemand de Développement

Union Budget FY 2013

Union Budget – F 13

The budget was prepared under Political and Economic Constraints. The options available to address the various issues were limited. The oil price was much higher than the budgeted levels. In FY 12, the revenue generation was not up to expected levels. There was a good balancing act done by the government. The government could have continued the stimulus for one more year by keeping the Excise duty and Service tax at 10% levels. But there was no visibility of immediate availability of funding from other sources. The government has prepared notes on strategy, Medium term fiscal plan ,etc. In the long run, many options to increase the revenue are  possible through widening the tax net. But the efforts could start this year and there was an effort towards brining more into the tax net.

Since there is a pressure from higher levels of deficit and this is likely to persist going forward, there is an immediate need to look at non conventional sources of finance. The government could consider, capitalising the land available with government departments, Central PSU’s. The sick PSU’s can be turned around within a short period if they have assets which are of very high present and market value.

The increase in Excise and Service tax is likely to increase the cost of inputs and final products. This is likely to have a cascading effect on price levels and likely to keep the inflation rates at very high levels. The oil price risk is a game changer and this could increase the inflation as well as put more strain on the government financees.

Financials

As against the budgeted gross tax revenue of Rs 9,32,440 crore for 2011-12, the revised estimate has been pegged at Rs 9,01,664 crore. Shortfall in corporate taxes is expected to be Rs 30,000 crore, there will only be marginal shortfall in personal income tax.

For F13, the Centre is targeting a 15.5 per cent increase in gross tax revenues. Indirect tax proposals to result in a net revenue gain of Rs 45,940 crore during next financial year. Direct tax proposals are likely to result in loss of Rs 4,500 crore. In all these years, the share of direct tax was going up .

Service tax. For the first time this will cross Rs.1,00,000 cr and projected at Rs 1,24,000 crore. But the actual collection might be higher than the budget .

Total revenue receipts is budgeted at Rs.935685 cr,21.99% growth over Rev. F12 budget. Rev. F12 revised estimate is 2.72% lower than the F11 at Rs.766989 cr.

Net tax Revenue: Estimate for F13 is kept 20.06% higher than the revised estimate of F12. It is at Rs.771071.00 cr. Forecast for  F12  is 12.7% higher than the F11 figure.

Non Tax revenue: It is at Rs. 164614 cr, 31.97% higher than the revised F12 forecast. Where as  F12 estimate is at Rs.124737 cr, 43% lower than the actual F11 actual performance.

Capital Receipts is estimated at Rs.555241 cr, 3.67% lower than the  F12 forecast. While F12 is estimated at Rs. 576395 cr, 43% higher than the F11. Out of which 92.5% would come from debt receipts and rest from Non debt receipts.

Total Receipts is targeted at Rs.1490925 cr, 13% higher than the revised forecast for F12.where as estimate for F 12 is  at Rs.1318720 cr,10% higher than the F11.

Total Non Plan Expenses: Non Plan expenditure for F13 is estimated at Rs. 969900 cr, 8.72% higher than the revised F12 forecast. Out of which capital expenses is kept at Rs.104304 cr , 36.5% higher than the Rev.F12.

Revised F12 non plan expenses was at Rs.892116 cr , 9% increase over F11 figure.

Plan Expenses: Total plan expenses are budgeted at Rs.521025 cr, 22% higher than the rev. F12. where as Rev. F12 was higher than F11 by 12.5% YoY.

Out of total plan expenses capital plan expenses is targeted at Rs.100512 cr , 25% higher than rev.F12.Rest are from revenue Expenses.

Overall Expenditure is estimated at Rs.1490925 cr, 13% rise over Rev. F12 forecast where as Rev. F12 estimate is at Rs.1318720 cr, 10% rise over F11.

Thus Total Expenditure is budgeted at 159% of the total revenue receipt for F13.And For Rev. F12 it is estimated at 172%.

Overall  Capital expenditure is budgeted to grow at 30.7 per cent as against 10.6 per cent growth in revenue expenditure.

The fiscal deficit target at 5.1 per cent for 2012-13 is lower than 5.9 per cent achieved in the current year.

GDP is projected at 7.6% +  0.25%

Direct tax receipts as percentage of GDP remains stagnant at 5.8 %. This could be increased substantially by improving the tax administration to bring those who are paying no tax and those who are liable to pay higher tax. The direct tax could be increased at least 20% a year and this would go a long way in reducing the fiscal deficit.

Interest costs. Expected to increase from Rs.275168 cr to Rs.319759 cr, 16% increase over the previous year. The net market borrowing through dated securities to finance this deficit is Rs 4.79 lakh crore. This is going to keep the interest rates at very high levels.

The fiscal deficit is pegged at Rs 5,13,590 crore, which is 5.1 per cent of GDP. This time budget is higher than for the last year but still there is risk that as we go along , this might be higher than the budget.

Disinvestment. The target is Rs 30,000 cr. If a few issues are planned from May, then a target of Rs.50,000 cr could be looked at. In F12 the government could mobilise only Rs.14,000 cr.

Subsidies . Capping  subsidies within 2 per cent of GDP requires fine balancing. By improving the implementation of the schemes, the subsides could be targeted towards those who require these subsidies. The government has planned Rs 60,974 crore fertilizer subsidies. This is  lower than expected subsidy requirement  of Rs 90,000 crore in F12. Since the Farm produce prices at retail level has gone up significantly, there is a scope by which within three years, the fertilizer  subsidies could be brought down to Zero within three years. This could be ensured through higher realisation for produce for farmers at the farm level.

The petroleum subsidies have to be better targeted and here again, government could look at a reduction of these subsidies of 20% year on year. Even if decontrol will take time, by better administration the subsidies could be brought down substantially.

Agriculture. Continued interest subvention on crop loans, an additional subvention up to 3 per cent for prompt loan payments and a 21 per cent increase in agricultural credit will give a boost to farm sector. The access to viability gap funding for irrigation projects will attract private investors. There was a plan to provide Rs.10000 cr to NABARD for supporting the RRB’s. This will increase the lending capacity of RRB’s.

The thrust on Agriculture and providing funds to leading Agri Universities is likely to provide a momentum to increase the productivity in agriculture and the we could achieve a higher growth projected than in the budget, provided, the funds are utilised for productivity improvement . We could target a higher growth in Agriculture than what was projected in the Eco Survey since our productivity levels are still low compared to many other countries in the world.

Automobiles. The Budget has proposed an increase in excise duty on large cars to 24 per cent. But, large cars with engine capacity above 1,500 litres will attract an additional three per cent ad valorem rate — expected to work out significantly higher than the previously fixed Rs 15,000 extra excise on such vehicles.The customs rate on completely-built unit imports will see a 15 per cent increase, apart from an around two per cent increase in countervailing duty (in lieu of excise).

Banks. Public sector banks (PSBs) are likely to receive a major portion of the Rs 15,900 cr  allocated for recapitalisation of government financial institutions. This will improve the capital adequacy ratio of the banks and help to raise additional resources of  Rs.150,000 cr which will increase the liquidity position and funds disbursement.

Capital Markets. Qualified foreign investors (QFIs) have been permitted to access the Indian corporate bond market. Additional Tax benefits in Infra bonds and widening the limit would help to attract funds from abroad. This could be the starting point for deepening the market. Reduction of STT will reduce the cost for Institutional players in the market. Reducing the withholding tax on ECB’s would reduce the cost of borrowing from abroad for the issuers of ECBs.

FDI. The proposed amendment in the Income Tax Act retrospectively from April 1, 1962. Under the proposed amendment, all persons, whether resident or non-residents, having business connection in India will be required to deduct tax at source and pay it to the government even if the transaction is executed on a foreign soil. This has created lot of confusion and those who brought FDI in earlier years are worried and there were about more than 500 such transactions. The amendment will apply to all past transactions concerning assets in India. The immediate one to be impacted will be a company like  Vodafone.

GST.  The intention is to start t his process in the middle of the year  but it might take more time since still many of the issues are to be sorted out.

Housing. There was a thrust on affordable housing and ECB tax guidelines and interest subvention up to Rs.15 L of loan for an individual will help to boost the demand of houses in this segment. It will also help to reduce the cost for the borrower.

Infrastructure sector. Steps to improve access to funding and tax  concessions will help to increase  investments in the infrastructure . The limit for tax free bonds in the infrastructure sector has been doubled to Rs 60,000 cr. The relaxation in withholding tax for ECB’s will reduce the foreign borrowing cost.

Oil . The proposed increase in cess on production of crude oil, to Rs 4,500 per tonne from Rs 2,500 per tonne, will increase the cost of domestic oil production by Rs.250  to Rs.300 per barrel. Oil prices can play spoilsport in determining the fiscal deficit for the year. The government may have to provide higher subsidies. But the scope for very high subsidies is limited. There may be a need to increase the fuel prices which would have a cascading effect on the entire costs in the economy.

The budget also has a provision to exempt payment to certain foreign companies in India in Indian currency for import of crude oil. While the intended beneficiaries have not been explicitly mentioned, this provision would enable ease of crude oil imports from Iran. This would aid refiners such as MRPL, which depend on Iran for the bulk of their requirement.

Power . Exemption of 5 per cent customs duty on thermal coal,natural gas and liquified natural gas (LNG) will make the cost of power cheaper. The extension of 10-year tax holiday and additional depreciation of 20 per cent in the first year will marginally improve the performance of this sector.The dividend distribution tax (DDT) rationalisation will help improve return on equity for the multi-tiered structure of most power companies.

The  duty cut on imported coal will result in a saving of  Rs. 480 a tonne to the power producers in case of Indonesian coal and higher for for African coal. India imported nearly 84 million tonne of coal in 2011. This will result in lowering the power generation cost by 25 paisa per unit.

Telecom. The government has estimated  a revenue of Rs.40000 cr from the auction of Spectrum. The government should initiate the process immediately after the start of financial year and try and mobilise these funds by the first half. Despite the scope exists for looking at a higher revenue through this mode, the government should make sure that there is no exhorbitant cost for spectrum, so that the cost of communication remains at competitive levels in India.

Road ways.The allocation to the highways sector has been increased by 14 per cent to Rs 25,360 crore in F13 and the government has set a target of covering a length of 8,800 km roads under NHDP next fiscal.

SME’s. The financing available under the proposed ‘India Opportunities Venture Fund' will be routed through the Small Industries Development Bank of India  and Rs.5000 cr fund would be created to support SMEs. They are the major suppliers to the large corporates and facilitating the growth of SMEs would result in higher level of industrial growth. Exemption from capital gains tax on sale of a residential property has also been proposed, if the funds raised are used for subscription in equity of a manufacturing company for purchase of new plant and machinery.

UID. Budget  gave a big-boost to the Unique Identification Number (UID) initiative, with an allocation of  Rs 14,000 crore for the Aadhaar scheme. The budget has a target to cover 40 cr Indians. This is the starting point for moving towards better management of Subsidies and tax administration. The Unique Identification Authority of India (UIDAI) has completed coverage of 20 crore Indians.

Venture Capital. Liberalising the operation of Venture capital Funds will increase one more window of financing for sectors which are not able to attract funds from Venture capital companies.

R.Kannan