The disinvestment target for 2024-25 is likely to be slashed by half from the target of Rs 51,000 crore for this fiscal as the government turns its focus on the 2024 general elections.
The government has collected only Rs 10,051 crore through disinvestment so far, and analysts said it would fall short of the target by quite a margin. They said the government would be cautious with stake sales during an election year.
Stating they are yet to work out the budget numbers, North Block officials said they would be cautious and conservative with disinvestment targets. Setting a lower target and achieving more than missing out is better, they said.
Partha Chatterjee of Shiv Nadar University said “given the track record on disinvestment, and the political sensitivity around that, it is unlikely the government will announce any big bang disinvestment”.
Finance minister Nirmala Sitharaman will present the interim budget for 2024-25 on February 1. The key numbers that would be watched include the disinvestment target and the fiscal glide path.
The post Covid-19 fiscal consolidation roadmap proposed by the government estimates the fiscal deficit at 5.2 per cent of GDP in 2024-25 and 4.5 per cent of GDP by 2025-26 from the budgeted 5.9 per cent this year.
A lower disinvestment target, analysts said, translates to shrinking revenue from the stake sale of PSUs, which could have a significant impact on the government’s fiscal consolidation efforts.
This potential shortfall could widen the fiscal deficit, the difference between total revenue and expenditure.
To plug the potential revenue gap, the government faces a complex balancing act — it could resort to increased borrowing, which could ease immediate pressure. But it also means higher interest payments and a growing debt burden in the long run.
It could also resort to cutting back on spending, especially in crucial sectors such as healthcare or infrastructure, which could stifle growth and development.
The Centre could also look into alternative monetization schemes for infrastructure projects, but raising significant resources through this route remains challenging.
Even if the interim budget sets an ambitious target, the North Block officials would wait for the general election outcome to go ahead with the strategic sale.