It is highly probable that India will fall well short of its $9.5 bn privatization target this year.
Prime Minister Modi’s selloff agenda has met resistance from labor unions. It faces delays due to bureaucracy related problems and the change of the top team at the finance ministry that is in charge of asset sales.
Officials confirm a fall in global oil prices will reduce the government’s subsidy burden. It increases the likelihood of hitting India’s ambitious fiscal deficit target of 4.1% of GDP in this fiscal year which ends in March.
The revenues from share sales could reach just 50% of the target. That will force Modi to take the extra spending cuts after he last introduced mandatory spending cuts targeting bureaucrats.
“At the most we could raise 250-300 bn rupees ($4.1-$4.8 bn) from disinvestment this year,” one senior finance ministry official said.
In the maiden budget, there was a target set of raising 584 billion rupees ($9.5 billion) from the sale of shares in companies in which the state has stakes.
The government has so far raised 518m rupees. That’s less than one 1000th of its target, while more than half of the fiscal year has already gone. The budget’s assumption is that sell-off proceeds will constitute 5.6% of total revenues.
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Source: Reuters
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