Budget 2017: Meeting disinvestment target is key to achieving fiscal deficit goal

Finance Minister Arun Jaitley during his Union Budget 2017 speech stated that the fiscal deficit aim for the next fiscal would be 3.2% instead of 3.%. Analysts believe that disinvestment targets is key if the government has to achieve this fiscal deficit target. 

Jaitley said that the Government plans to raise Rs 72,500 crore through disinvestment.  In his Budget speech, FM Arun Jaitely said, “The government plans to raise about Rs 72,500 crore through disinvestment of central public sector enterprises (CPSE) in 2017-18.”

Venkataraman Rajaraman, Associate Director at India Ratings said, “Achieving 3.2% fiscal deficit target also depends on the government’s success in achieving the Rs 72,500 crore of disinvestment receipt in 2017-18, in 2016-17, the government expects Rs 45,500 crore disinvestment receipt as against Rs 56,500 crore budget estimate.”

For budget 2017-18, Jaitely has set fiscal and revenue deficit target at 3.2% and 1.9% respectively.  

However, Ind-Ra said, “The government is still quite far from achieving this revised target.”

Since last six years, Centre has failed to achieve its disinvestment targets.

During the last Union Budget, finance ministry had set a disinvestment target of Rs 56,500 crore. Rs 36,000 crore was expected from minority stake sales and remaining Rs 20,500 crore from strategic stake sales.

According to Comptroller General of Accounts, the government up to has raised Rs 21,400 crore through the disinvestment of stakes in PSUs. It still has to divest stake in many companies to raise around Rs 36,000 crore. Hence, this remains a challenge. 

During 2015-16, Centre raised Rs 25,312 crore from the set target of Rs  69,500 crore - out of which Rs  41,000 crore was via  minority stake sale and an additional Rs 28,500 crore from strategic sale.

To kick start the divestment target, the Union cabinet announced listing of three railway PSUs - PSUs IRCTC, IRFC and IRCON, and also proposed merger and consolidation to create globally competitive public sector units.