Icra said the disinvestment target for FY24 is likely to be undershot by Rs 36,000 crore
In the upcoming interim budget, the Center is likely to set the disinvestment target for 2024-25 (FY25) below Rs 50,000 crore, rating agency Icra said in a report on Thursday. It said a higher target could distort the budget calculation if there is a shortfall in revenue.
“Given the uncertainties associated with market transactions, it would be prudent to set a moderate target of less than Rs 50,000 crore for FY 2025, rather than a higher target that could distort the budget calculation if a there would be a major shortage of such income. of fiscal policy, based on the trends of the past year,” the agency said in its report ‘Expectations-Interim Budget 2024-25’.
For FY24, the Center had set a disinvestment target of Rs 51,000 crore, but has been able to achieve only a fifth (Rs 10,050 crore) of that so far. The strategic sale of a host of Central Public Sector Enterprises (CPSEs), including Shipping Corporation of India (SCI), NMDC Steel Ltd, BEML, HLL Lifecare and IDBI Bank, is all set to be completed in the current fiscal. However, the due diligence process for these entities has yet to be completed.
For IDBI Bank, the Center has received several offers but final approval from the Reserve Bank of India (RBI) and the Center has not been given to any of them so far. Moreover, the privatization of BEML and SCI is facing both public and political resistance.
Icra said the disinvestment target for FY24 is likely to be undershot by Rs 36,000 crore. “The disinvestment process for major CPSEs such as IDBI Bank and Shipping Corporation is expected to pick up only in FY 2025,” the report said.
However, on the revenue side, Icra said the Centre’s collections could exceed by around Rs 0.5 trillion, driven by robust direct taxes and higher-than-budgeted dividend transfers by the RBI.
“We expect GOI’s Gross Tax Revenue (GTR) to grow by a healthy 11 per cent in FY25, led by direct taxes and GST collections, even though excise and customs duty growth is likely to be subdued,” it said report.
On the expenditure side, total expenditure is likely to remain in line with FY24 estimates of Rs 45 trillion. This is mainly because capital expenditure was lower than budgeted.
The agency added that the Center is likely to target a fiscal deficit of 5.3 per cent of gross domestic product (GDP) in FY25. In FY24, this is likely to be 6 percent. In Budget 2023, it had set the target of 5.9 percent for FY24.
“This would leave an absolute fiscal deficit of Rs 17.1 trillion in FY25, a welcome decline from the Rs 17.9 trillion budgeted by the Government of India and expected by us for FY24,” the report said .
For FY26, Icra said it would be challenging to achieve the 4.5 percent target due to high capital expenditure.
“As per Icra estimates, every 10 basis points (bps) expansion in fiscal deficit to GDP would allow an additional capital investment of Rs 32,400 crore,” Icra said.
First print: January 11, 2024 | 2:49 PM IST