Disinvestment is on track, says Pandey
The Chief Economic Adviser (CEA) in Finance Ministry Dr KV Subramanian expects 6.5-7% growth in FY-23 and 8% thereafter, driven by investments and increased productivity from privatisation.
“(With) the combination of rise in investment and productivity, we expect the growth in FY-23 to be between 6.5-7% and accelerate thereafter to 8% a year,” he told FICCI’s 18th Annual Capital Markets Conference ‘CAPAM 2021 – Beyond India@75: Accelerating Growth Through Capital Market’ on 29 July 2021,
“Capex creates demand in the informal sector and capex driven economy is important.”
Reforms introduced by the government are as path-breaking as 1991 reforms and will indeed have impact on the investments and productivity.
On inflation, the CEA said that the overall restrictions during the second wave were very less, and allowed supply chain to work smoothly. “Going forward, inflation should be range bound despite some rise in commodity prices.”
Speaking on the fiscal deficit and capital expenditure, he said, “I don’t anticipate either breaching of fiscal deficit target or cutting down on expenditure. Some pruning on revenue expenditure have already started but not on capex as it is important for sustained recovery.”
“Some of the statistics suggests that the intensity of the third wave, if it happens, may not be that large and the learnings from the second wave will be used. Therefore, the economic impact should be much lower,” he added.
“We need to balance the fiscal resources as well as reforms that we need to bring into the economy. Ultimately it will be the private sector that will drive the business environment,” said Tuhin Kanta Pandey, Secretary, DIPAM, Ministry of Finance.
Disinvestment is on track, added Pandey. “Essentially, we really must create a market for public assets. A well-created market will happen when there is transparency, and competitive bidding, among others.
“After almost 17 years, India needs to see some privatisation. As much as the government would like to disinvest, we also need businesses to come forward and participate in our bidding process.”
He stressed that the government is not a business enterprise and has huge social responsibilities. It cannot be a micro player as well as a macro player all at the same time.
He acknowledged that there have been delays and pushbacks because of COVID, but broadly, the disinvestment plan is on track. “The Finance Minister had named the enterprises (for disinvestment) in the Budget. We are striving to conclude the transactions; we are fairly open about it.”
The new Public Sector Enterprises (PSE) policy states that the government would like to retain a bare minimum stake in public enterprises in four strategic sectors. “For the first time banking, insurance, and financial services, which used to be important segments but were discussed separately from the other enterprises, have been brought together into one policy. For the first time even the bare minimum concept applies on the financial sector as well,” Pandey said.
To some extent the government will always require more resources and we will also have to balance it with a fiscal stability and a macroeconomic stability. You cannot be profligate in terms of endless financing otherwise the inflationary impacts will hit us. This (PSE) policy says that we will have bare minimum in the strategic sectors, he said.
“Strategic disinvestment is going to be a primary model. However, that is not the only model. We cannot constrain the enterprises just because it is unable to put in additional capital. Additional capital will always be needed to grow. Unshackling of the enterprises from the budgetary constraints of the Central Government will do a lot of good to the growth of the enterprises, as well as in terms of generating employment,” Pandey said.
Shardul Shroff, Chair, FICCI Stressed Assets Committee and Executive Chairman, Shardul Amarchand Mangaldas & Co, noted that COVID has had “a deep impact on the Government’s disinvestment programme, but the question is whether we need to have alternatives.”
Regarding disinvestments of certain public sector enterprises, Shroff said, “A lot has been said regarding this (disinvestment) being a fiscal tool. It is better to have a revise strategy in terms of looking at it as a loss exercise rather than a profit taking exercise. A little change in strategy can make all the difference.”
Arun Mehta, MD & CEO, SBI Capital Markets Ltd, noted that structural reforms by the Government have stabilised. “Foreign investment is steady, banks are doing well – they are back to making higher profits than they were ever before.
“SEBI has been very forthcoming and accommodating and the result is that we have seen 27 IPOs from January onwards. Some of them have not only done well but are listed in premium prices,” he said. #economy #investment #banking #industries /fiinews.com
