The Centre has set before itself a Herculean task of amassing some `2.1 lakh crore by selling firms from its stable of state-run companies in the coming financial year. While the aim mentioned in the Budget is laudable, as it clearly spells out the government’s intent to get out of the business of running businesses, there is considerable doubt on the need for setting such an ambitious target and the Centre’s ability to actually do it, given its track record in disinvestment.
At a time when the global and domestic economies are going through a downswing and stock markets are moving erratically, many analysts question if this is the right time to go about selling the family silver. Others question whether such a large target can at all be fulfilled given the fact that the government managed to raise only `65,000 crore out of a targeted `1,05,000 crore in 2019-20. The finance ministry itself avers that its driver would be strategic disinvestments of large companies like the oil marketing giant BPCL and logistics firm Concor and that it can achieve the target given the volume of work it has already put in.
But naysayers point out that at a time of slowdown, multiple sales of large PSUs through any route—strategic disinvestment or retail share sales—could well knock the price for state-run companies down below current expectations. The Centre has already slashed corporate tax rates and the target for revenues on this count for the coming financial year has been set at `6.81 lakh crore, some 11.6% more than the current year’s estimated collections.
Similarly, it has set an ambitious target of `5.8 lakh crore from GST, against this year’s estimated actual of `5.14 lakh crore. Given the tepid state of India Inc., even these may be in doubt, especially if the global economy worsens. The problem with setting high targets that do not get fulfilled is that at the end of the year, if other revenue generation targets also fail, then the spending shoe starts to pinch and borrowings have to necessarily go up, something that this government with its huge debt burden can ill afford to do.