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Business News/ Budget 2019 / News/  Aramco-Like LIC IPO key to success of Nirmala Sitharaman's budget math
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Aramco-Like LIC IPO key to success of Nirmala Sitharaman's budget math

Changes to a law and a buy-in from employees’ unions are some of the preparatory work needed for selling a stake in LIC
  • Disinvestment targets have been missed several times in the previous years
  • Finance Minister Nirmala Sitharaman will be relying on the ₹2.1 trillion she plans to raise by selling state-owned assets to bridge the budget gapPremium
    Finance Minister Nirmala Sitharaman will be relying on the 2.1 trillion she plans to raise by selling state-owned assets to bridge the budget gap

    India’s 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 2.1 trillion ($29 billion) she plans to raise by selling state-owned assets to bridge the budget gap. A bulk of that -- as much as 900 billion rupees -- is likely to come from sale of shares in Life Insurance Corp. 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 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 in revenues if these asset sales don’t take place."

    Disinvestment targets have been missed several times in the previous years.

    This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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    Published: 03 Feb 2020, 03:37 PM IST
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