Budget: Narendra Modi to target record asset sales

New Delhi: The government will seek to raise up to a record $11.7 billion in asset sales in its maiden budget this week, a senior government source said, bolstering state finances and buying time for structural reforms to revive a weak economy.

The privatisation target could reach Rs 700 billion, almost equal to all proceeds over the last four years, in a budget Prime Minister Narendra Modi hopes will launch the growth and jobs agenda that in May won him India’s biggest election mandate in three decades. The budget is due on Thursday.

“The finance ministry has approached different ministries to increase the divestment target,” said the senior official with direct knowledge of the budget process.

The previous government had pencilled in sell-off proceeds of 569 billion rupees.

The 63-year-old premier has made a decisive start by naming a streamlined cabinet, approving a slew of infrastructure projects and embarking on what promises to be a whirlwind first year of trade diplomacy.

But his government has been plagued too by the economic ills that brought down its predecessor: weak growth and high inflation caused by spending too much and investing too little.
Despite the market refo-rms of 1991 that brought down the curtain on decades of socialist isolation, tracts of Asia’s third-largest economy remain off limits to outside investors.

Mr Modi wants to open up industries like defence, but selling controlling stakes in bloated state enterprises is out of the question. They are not competitive and any job cuts ordered by a foreign owner would cause an outcry.

Instead, he will whittle down state stakes in firms that have already been partly sold, like Steel Authority of India Ltd, without surrendering overall control, said the official and other sources familiar with the plans.

Stocks have enjoyed a Modi boom, rallying 23 per cent this year. Listed state firms have outperformed on hopes that wider ownership would discipline managers and that their bottom line would benefit from a loosening of price controls.

Leading the pack is Indian Oil, which has gained 62 percent in 2014. ONGC, another oil firm, is up 46 per cent. Coal India has risen 36 per cent.