Budget 2024: Why Modi government is likely to maintain disinvestment and dividend targets of close to Rs 1 lakh crore
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Budget 2024 expectations: The Modi government is likely to maintain its revenue collection targets of nearly Rs 1 lakh crore for the fiscal year 2024-25 (FY25) through disinvestment, asset monetization, and dividends from non-financial Central Public Sector Enterprises (CPSEs), according to senior officials.
The interim budget presented in February combined disinvestment and asset monetisation under the ‘miscellaneous capital receipts’ category, instead of listing them separately, according to an ET report.This change pegged the combined realisation for the current fiscal at Rs 50,000 crore, up from the revised estimate of Rs 30,000 crore for FY24.
Additionally, another Rs 48,000 crore was expected from dividends from non-financial CPSEs and entities where the government holds minority stakes. The actual dividend collections have surpassed initial estimates for the third consecutive year, reaching a new high of Rs 63,749 crore in FY24, approximately 27.5% higher than the revised estimate of Rs 50,000 crore.
This remarkable performance, as noted by the Department of Investment and Public Asset Management (DIPAM), reflects the robust health of state-run firms across various sectors. Disinvestment and asset monetization also showed strong results, with proceeds totaling Rs 16,507 crore and Rs 16,000 crore respectively, beating the combined revised target of Rs 30,000 crore for FY24.
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Outlook for FY25
Despite these successes, the government is not inclined to increase its revenue targets for FY25 from the levels set in the interim budget, the rationale being to guard against presenting “estimates that will fall short of actual realisations and upset resource allocation plans,” in the words of an official.
A final decision on the specific asset monetisation target will be made closer to the budget presentation on July 23. The government anticipates significant proceeds from the planned privatisation of IDBI Bank and divestments in Shipping Corporation of India and NMDC Steel, among others, in FY25.
Analysts’ Perspective
Analysts at CareEdge Ratings have noted that with a substantial dividend of Rs 2.11 lakh crore from the Reserve Bank of India (RBI), the government’s fiscal position remains robust, potentially reducing the urgency to aggressively pursue divestments.
The combined target for divestment and asset monetisation represents just 1.6% of the government’s budgeted non-debt receipts for FY25, indicating a reduced reliance on these revenues to manage the fiscal deficit.
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However, CareEdge analysts have identified a significant disinvestment potential of about Rs 11.5 lakh crore at current market valuations, assuming the government maintains at least a 51% stake in public firms and offloads excess shares.
DIPAM Secretary Tuhin Kanta Pandey had previously emphasised that setting overly high annual disinvestment targets could create market uncertainties and adversely impact the value creation strategy for the CPSEs. Therefore, the government is committed to a “calibrated disinvestment strategy” to optimise outcomes, he said.
The interim budget presented in February combined disinvestment and asset monetisation under the ‘miscellaneous capital receipts’ category, instead of listing them separately, according to an ET report.This change pegged the combined realisation for the current fiscal at Rs 50,000 crore, up from the revised estimate of Rs 30,000 crore for FY24.
Additionally, another Rs 48,000 crore was expected from dividends from non-financial CPSEs and entities where the government holds minority stakes. The actual dividend collections have surpassed initial estimates for the third consecutive year, reaching a new high of Rs 63,749 crore in FY24, approximately 27.5% higher than the revised estimate of Rs 50,000 crore.
This remarkable performance, as noted by the Department of Investment and Public Asset Management (DIPAM), reflects the robust health of state-run firms across various sectors. Disinvestment and asset monetization also showed strong results, with proceeds totaling Rs 16,507 crore and Rs 16,000 crore respectively, beating the combined revised target of Rs 30,000 crore for FY24.
Also Read | Budget 2024 income tax expectations: Top 5 things FM Sitharaman should do for taxpayers – from tax slab changes to hiking standard deduction
Outlook for FY25
Despite these successes, the government is not inclined to increase its revenue targets for FY25 from the levels set in the interim budget, the rationale being to guard against presenting “estimates that will fall short of actual realisations and upset resource allocation plans,” in the words of an official.
A final decision on the specific asset monetisation target will be made closer to the budget presentation on July 23. The government anticipates significant proceeds from the planned privatisation of IDBI Bank and divestments in Shipping Corporation of India and NMDC Steel, among others, in FY25.
Analysts’ Perspective
Analysts at CareEdge Ratings have noted that with a substantial dividend of Rs 2.11 lakh crore from the Reserve Bank of India (RBI), the government’s fiscal position remains robust, potentially reducing the urgency to aggressively pursue divestments.
The combined target for divestment and asset monetisation represents just 1.6% of the government’s budgeted non-debt receipts for FY25, indicating a reduced reliance on these revenues to manage the fiscal deficit.
Also Read | Budget 2024: Top 3 steps Modi government should consider for employment generation
However, CareEdge analysts have identified a significant disinvestment potential of about Rs 11.5 lakh crore at current market valuations, assuming the government maintains at least a 51% stake in public firms and offloads excess shares.
DIPAM Secretary Tuhin Kanta Pandey had previously emphasised that setting overly high annual disinvestment targets could create market uncertainties and adversely impact the value creation strategy for the CPSEs. Therefore, the government is committed to a “calibrated disinvestment strategy” to optimise outcomes, he said.
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