New Delhi: The Indian government is likely to target Rs40,000 crore ($7.42 billion) in proceeds from stake sales in state-run companies in the next fiscal year, a finance ministry official with direct knowledge of budget talks told Reuters on Wednesday.
The official also said the government is likely to allocate Rs20,000 crore for capital infusions into state-run banks in the next financial year, up from Rs15,000 crore set aside for bank recapitalisation in the current year.
The revenue target from a partial privatisation of state-run companies is higher than the Rs30,000 crore New Delhi is aiming for in the current fiscal year that ends in March.
With less than two months to go before the year closes, the government has managed to raise 70% of the targeted amount, and officials in the government concede that the final figures for this year could fall shy of the target.
The struggle to meet the current year’s target had made many investment bankers believe that the government would likely budget at least Rs30,000 crore for next fiscal year.
But a resource crunch has forced New Delhi to aim higher, said the official, who declined to be identified because he was not authorised to speak about the budget, to be released on 28 February.
“The aim is to maximise your revenue options. Low growth has constrained our resources,” the official said. The government is still to finalise the target, he said.
India needs to augment its revenues to help lower the fiscal deficit to its targeted 4.8% of gross domestic product in the financial year that begins on 1 April. A swollen deficit has put the country’s investment grade credit rating in peril.
The planned capital injection into state banks, while higher than in the current year, still falls short of their capital requirements. The central bank said in September that the government needed to infuse Rs90,000 crore into state-run banks to meet upcoming Basel III requirements.
India’s state-run banks face rising bad assets as companies struggle to pay off loans in a sluggish economy.
The official said the government would likely infuse capital in 12 banks, including State Bank of India, the country’s largest lender.
The government this month approved a plan to inject around Rs3,000 crore in State Bank of India through preferential allotment of shares.