NEW DELHI: Finance minister Nirmala Sitharaman is staking the success of her fiscal math on a big-bang share sale of the nation’s largest state-run insurer.
With tax revenue seen shrinking as a percentage of the total Budget for a third straight year, Sitharaman will be relying on the Rs 2.1 lakh crore ($29 billion) she plans to raise by selling state-owned assets to bridge the Budget gap. A bulk of that -- as much as Rs 90,000 crore -- is likely to come from sale of shares in Life Insurance Corporation of India, which has total assets of $434 billion.
A lot of preparation will be needed before the “big-bang” stake sale can go through, said Pranjul Bhandari, chief India economist at HSBC Holdings Plc in Mumbai.
Changes to a law and a buy-in from employees’ unions are some of the preparatory work needed for selling a stake in LIC.
There is a chance that the stake sale -- which investors likened to the initial public offer (IPO) of Saudi Aramco -- may not happen next year, and that could derail Sitharaman’s Budget calculations, analysts said.
“There might be a potential slippage,” Bhandari told BloombergQuint. “In terms of the math there might be a slippage of 0.3% of gross domestic product (GDP) in revenues if these asset sales don’t take place.”
Disinvestment targets have been missed several times in the previous years.