Govt likely to set disinvestment target of around Rs 50k crore: ICRA

Chennai: In the interim budget, the government is likely to set the disinvestment target lower than Rs 50,000 crore for FY25, finds ICRA.

Given the uncertainties involved in market transactions, it would be prudent to set a moderate target of sub-Rs 50,000 crore for FY2025, instead of a higher aim that may disrupt the budget math if there is a large shortfall in such receipts by the end of the fiscal, based on the past year trends.

For FY24, the Centre had set a disinvestment target of Rs 51,000 crore but has only been able to achieve Rs 10,050 crore of it so far. Strategic sales of a host of Central Public Sector Enterprises (CPSEs), including Shipping Corporation of India (SCI), NMDC Steel Ltd, BEML, HLL Lifecare, and IDBI Bank, are in the pipeline for completion in the current fiscal. The process of due diligence for these entities is yet to be completed.

Further, ICRA estimates that the government would budget for a capex of Rs. 10.2 lakh crore in FY2025 – a 10 per cent growth compared to over 20 per cent expansion seen in each of post-Covid years. The slowdown in capex growth is likely to have some bearing on economic activity and GDP growth.

The expansion in the capex and the extent of fiscal consolidation would be scrutinised closely, given the implications for growth and G-sec yields, respectively. A higher capex target would impinge on the government’s ability to bridge half the required fiscal consolidation in FY2025, thereby making the task of reaching a medium-term fiscal deficit target by FY2026 even more challenging.

Revenue receipts are expected to exceed the FY24 Budget Estimate by Rs 50,000 crore, largely driven by the overshooting in net tax by over Rs 30,000 crore vs BE and non-tax revenues by over Rs 20,000 crore owing to higher-than-budgeted dividend surplus transfer by the RBI.