The government has been 'conservative' when it comes to disinvestments, but it might be able to realise its target for FY23, according to experts
During the year, the government successfully sold its debt-laden airline Air India to the Tata Group for Rs2,700 crore.
Image: Shutterstock
It’s the first time since the BJP-led government came to power that its finance minister missed using the word ‘disinvestment’ in the Budget speech. An explainer on why and how it matters.
Tuesday’s Budget documents show that the government has reduced this expectation to Rs78,000 crore for the year, basically slashing more than half of its target. This number sends a clear signal to the Street that it expects the rest of the money to come from the share sale programme of Life Insurance Corporation of India (LIC); the rest of the sale will spill over to next year.
“The government has been realistic about its targets, and this means it is expecting the sale of assets like BPCL and others to happen in FY23. It has increased its borrowings to fund its activities, but on disinvestments, it has clearly been conservative,” says Suvodeep Rakshit, senior economist at Kotak Institutional Equities. According to the government, for FY21, its actual receipts from disinvestments stood at Rs37,896.96 crore. For FY21, it had targeted to raise an ambitious Rs2 lakh crore.
“The government has budgeted a lower amount of Rs65,000 crore for FY23. In the five years to FY21, India has only been able to achieve more than Rs90,000 crore twice—during FY18 and FY19. Therefore, the government might be able to realise its budgeted disinvestment target for FY23 given the pace of the economic recovery and the buoyancy in the markets, says Dr Arun Singh, global chief economist at Dun and Bradstreet.
It plans to sell its shares in LIC which will be one of the large IPOs in the country. Post that, next year it plans to sell the old assets it has been trying to offload.
As economic commentator and author Vivek Kaul explains: “Borrowing more right now means that taxpayers in the years to come will have to repay. As earlier finance minister Arun Jaitley said in his July 2014 Budget speech, we cannot leave behind a legacy of debt for our future generations. We cannot go on spending today which would be financed by taxation at a future date.”