Of all the things that the 1991 interim budget presented by Yashwant Sinha brought about, including liberalisation and globalisation, there was also the policy of divestment.
Of all the things that the 1991 interim budget presented by Yashwant Sinha brought about, including liberalisation and globalisation, there was also the policy of divestment. Though the dispensation of the day had thought of divestment as more of a market-balancing strategy, it has been increasingly used by governments, that too unsuccessfully, as a tool for containing the fiscal deficit. In fact, an analysis of data since FY92, when the policy was first initiated, shows that the government has time and again missed its targets for divestment. So much so, that in the last 25 years, the government has only been able to achieve the target on four occasions. Though the situation has somewhat improved since FY12, the realisation of budgeted receipts at 49.5%, has lagged the long-term average of 52.2%. While the current government changed the name of the department from divestment to department of investment and public asset management (DIPAM)—also restarting the policy of strategic sales—the situation has not changed much. The government was able to meet just 34% of the Rs 69,500-crore target set for FY16 (this includes Rs 28,500 crore set for strategic sales); DIPAM data shows that it has only achieved 42% of the budgeted Rs 56,500 crore till November 30.
You May Also Want To Watch:
With sluggish growth, slowing investment and demonetisation expected to play havoc with government’s finances, the finance minister will have to ensure that the government can trump the trend in FY18. With the government targeting strategic sales and following planned divestment, unlike in the past when governments used to scramble at the end to garner assets leading to low valuations, there may be better outcomes down the line, next year perhaps.