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Higher Revenue from Disinvestment?
Dec 7, 2017

India's fiscal deficit rose to 96.1% of the full-year's target at the end of October. This is on the back of lower revenue realization and a rise in expenditure. This raises concerns of slippage in the current financial year as during the same period of 2016-17, the deficit stood at 79.3% of the target.

With this, the government may clamp down on its expenses and public investment, which may slow down the growth. Alternatively, the government may allow higher fiscal deficit than the target of 3.2%. A third alternative is, higher revenue from disinvestment.

The disinvestment target for FY18 is Rs 725 billion. This is the highest target set so far for any year. The government has already collected Rs 523.9 billion so far higher than previous year collection of Rs 455 billion.

As per an article in Business Standard, the department of investment and public asset management (DIPAM) is looking to not only to achieve FY18 target, but also aiming to take disinvestment proceeds beyond Rs 900 billion. With this, any shortfall from other revenue items, including GST could be made up by disinvestment.

This optimism is mainly due mega deal of ONGC acquiring HPCL, which could get the exchequer Rs 300 billion. Similarly, there are a number of IPOs lined up which includes the likes of Ircon, Hindustan Aeronautics, Bharat Dynamics, and Mazgaon Dockyards. DIPAM is also working on OFS proposals which includes Indian Oil, Oil India, NHPC, and REC.

Not to mention, extra dividend from the PSUs in addition to disinvestment. With this, the slippage of the deficit could pretty much be negligible, provided there is no major gap in terms of GST collections. It will be interesting to see how the government approaches disinvestment in the coming months.

Data Source: DIPAM, Ministry of Finance

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