India on track to beat divestment target as LIC, IDBI sales boost coffers
India's asset sales have crossed $5.5 billion, with an IDBI Bank deal likely to add more, easing fiscal pressure from higher subsidies.
The Indian government is expected to surpass its ₹800 billion ($8.4 billion) divestment and asset monetisation target for the current fiscal year, according to officials familiar with the matter. The stronger-than-expected receipts are providing some relief to public finances, which have been strained by the Middle East conflict.
The completion of a ₹315.5 billion ($3.3 billion) share sale in Life Insurance Corporation (LIC) this week marked the government's largest divestment in years. Combined with stake sales in Coal India and Indian Railway Finance Corp, total proceeds have already exceeded $5.5 billion.
A long-pending sale of the government's stake in IDBI Bank is also expected to conclude this fiscal year, potentially adding another $2.5 billion to state coffers, one source said. Finance Minister Nirmala Sitharaman has set quarterly targets for the divestment department to accelerate the process.
The government's privatisation drive, launched in 2021, has moved slower than initially planned, with only a handful of strategic sales completed. Officials have increasingly turned to selling smaller stakes in listed state-run companies, which are easier to execute and carry lower political and regulatory risk.
Fiscal pressures persist
The conflict has driven up India's fertiliser import costs and fuel subsidies, raising concerns about the fiscal deficit. The government is targeting a deficit of 4.3% of GDP this year, but subsidy spending jumped 37% in the April-June quarter compared with the same period last year. Overall expenditure rose 11% in the quarter.
"Compared with previous years, the rise in divestment receipts is a positive trend. However, the government will need to mobilise more revenue this year, as fuel tax cuts alone have cost the exchequer more than 1 trillion rupees," said N.R. Bhanumurthy, director of the Madras School of Economics.
Sitharaman said last month there were no immediate plans to revise budget estimates.
Dividend boost
Dividend receipts from the Reserve Bank of India, state-run banks, and financial institutions have already reached ₹3.24 trillion for April 1 to August 5, exceeding the ₹3.16 trillion expected for the full year. The RBI contributed a record ₹2.87 trillion.
The government expects non-financial state-run companies to pay ₹750 billion in dividends this fiscal year, with ₹25.5 billion received so far. No major asset monetisation announcements have been made yet, though such deals could include selling land or creating infrastructure investment trusts.