India to miss divestment targets for 5th consecutive year
India is on track to miss its divestment goals for the fifth consecutive year, with a shortfall of $3.60 billion in 2023/24, as reported by Reuters. The government had hoped to collect $6.12 billion from divestment proceeds in the current fiscal year, which ends in March 2024. The delay in selling state-run companies and changing political priorities due to upcoming elections are cited as reasons for the deficit.
Delays in IDBI Bank and NMDC Steel stake sales
The Centre had anticipated raising around $3.60 billion through selling stakes in IDBI Bank and privatizing state-owned NMDC Steel. However, the Reserve Bank of India's lengthy vetting process for potential IDBI buyers has pushed the sale timeline past the 2024 Lok Sabha elections. Moreover, the NMDC Steel sale won't be completed this year due to state elections, Lok Sabha elections next summer, and union protests.
State-run firms offering smaller divestments and higher dividends
Although the overall target may not be met, the government could still achieve some smaller divestments this financial year. To make up for part of the shortfall, higher dividends are expected from state-run firms, as strong profits and steady demand enable them to provide larger payouts. So far, the Centre has received $2.43 billion from state-run companies, exceeding its $5.15 billion dividend goal.
The delays in divestment are not impacting fiscal deficit target
Former Union Finance Secretary Subhash Chandra Garg said that no privatization will occur during this government's term due to a lack of political interest in privatization policy. However, Rahul Bajoria, an economist at Barclays Investment Bank, argued that missing divestment targets is acceptable as long as the Centre meets its fiscal goals and there isn't a deficit. A third government official confirmed that the privatization delays will not affect the government's fiscal deficit target of 5.9% of GDP.
