India’s Target Of Selling Of State-Owned Firms Will Push Economy Closer To $5 Trillion, Say Analysts

According to a top Indian business leader, the Indian economy will inch closer to becoming a $5 trillion economy because of the efforts to privatize state-owned companies.

According to the target set by the country’s Finance Minister Nirmala Sitharaman in her budget announcement this week, the government will divest a total of 1.75 trillion rupees (about $24 billion) for the next fiscal year starting on April 1.

This means that the assets of state owned companies will either be sold off to the private sector or the government will list the companies on the stock exchange.

The target of disinvestment includes the privatization of a number of state owned companies such as Air India, Container Corporation of India and Shipping Corporation of India, among others. The proposals also include taking private two public sector banks and a general insurance company.

“This is a very good move,” Anil Agarwal, executive chairman of diversified natural resources firm Vedanta Resources, said on a television channel.

The efforts and plans of the government will provide a “great opportunity, all over the world, for people to come in and invest”, he said and added that this move will significantly enhance the productivity of the state owned companies.  

Last year, a $10 billion fund with U.K.-based investment firm Centricus was set up by Agarwal. This fund has the aim to make investment in government companies that are being put up for privatization.  While 5 per cent of the fund will come from his personal wealth while the rest will be generated from investors, according to the local media quoted Agarwal.

Investors have shown “tremendous response” towards his investment fund, Agarwal said and added that the fund aims to get hold of about 15 per cent to 20 per cent of the government companies that are set to be divested.

The state-owned oil and gas giant Bharat Petroleum Corporation, Shipping Corporation, Container Corporation and Hindustan Copper are among some of the companies that he wants to invest in, he said.

Before making a purchase, the companies on sale would be evaluated, the necessary due diligence done and would also be assessed to examine whether an investment will add valkue to the fund, Agarwal said. There is also likely to be lots of competition to acquire the public sector companies, he added. “This will definitely lead towards $5 trillion economy for the country,” he said.

A deficit target at 6.8 per cent of its gross domestic product has been set by the Indian government for the next fiscal year which according to analysts is a move that shows a shift in strategy of the government from survival to revival and growth.

According to Kaushik Das, chief economist at Deutsche Bank, there was high credibility in the overall revenue estimate projection and growth predictions for gross tax revenue as stated by the Indian government and it is likely that those targets would be met.  

Das said in a recent note that the total disinvestment target for the next fiscal is at 0.8 per cent of GDP which is lower than market expectations. “This is a prudent strategy,” he added.

(Adapted from CNBC.com)



Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability

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