India accelerates divestment of stakes in public sector undertakings

The Story in Brief

India has stepped up sales of stakes in state-owned companies to shore up revenue amid inflationary pressures and widening fiscal strains. Since the start of the year the government has reduced holdings in 10 public sector firms, raising more than 620 billion rupees. Transactions this year included stake sales in Cochin Shipyard, Indian Railways Finance Corporation, NHPC and Coal India, and a 6.5% sale of Life Insurance Corporation of India that raised $3.3 billion; the LIC sale was priced at a 10% discount and was oversubscribed.

Excluding LIC, sales in nine firms this year raised nearly 270 billion rupees. The government has met over 65% of its annual disinvestment target of 800 billion rupees. Analysts cited in the article say the proceeds provide non‑debt revenue as India faces a $37.4 billion trade deficit in the quarter to June, a fiscal deficit of 3.1 trillion rupees (18.2% of the budget estimate) and capital outflows that have weakened the currency and tightened domestic financial conditions.

The Indian Opinion

Some coverage and comments present the disinvestment drive as a clear fiscal success, citing the large LIC transaction and that over 65% of the target is already met, while other remarks use dramatic metaphors such as “tapping family silver.” Those framings can be one-sided. The LIC sale was offered at a 10% discount to attract buyers even as it was oversubscribed, showing demand was influenced by pricing. Proceeds do provide useful non‑debt revenue for near-term needs, but the article also reports trade deficits, capital outflows and a sizeable fiscal gap; it is therefore uncertain whether repeated stake sales are a sustainable long‑term fiscal strategy.

Original article: Inside India newsletter: What’s behind India’s rush to sell shares in state-owned firms – CNBC (Google News (India))

This story was summarised and commented on by AI from the source linked above.