Budget 2020: Government Sets Lofty Divestment Target Of Rs 2.1 Lakh Crore In FY21
Torn Indian rupee banknotes are displayed outside a store in the Zaveri Bazaar area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Budget 2020: Government Sets Lofty Divestment Target Of Rs 2.1 Lakh Crore In FY21


India set the highest-ever divestment target for the next financial year even as it missed its previous goal.

The central government aims to garner Rs 2.1 lakh crore through divestments in 2020-21, according to Union Budget documents. Of this, it expects to earn Rs 90,000 crore by selling stake in public sector banks and financial institutions, while the balance Rs 1.2 lakh crore will come by selling stake in central public sector enterprises.

In 2019-20, the government had hoped to earn Rs 1.05 lakh crore through divestment receipts. That has now been revised lower at Rs 65,000 crore.

While the divestment target may seem challenging, Finance Minister Nirmala Sitharaman, in her budget speech, said the government would sell a partial stake in its prized possession—Life Insurance Corporation of India—through an initial public offering. The country’s largest insurer has assets worth more than Rs 36 lakh crore as of March 2019.

“LIC divestment is a very big thing. For anyone in the finance sector, that’s going to stare them in the eye,” Arundhati Bhattacharya, former chairman of the State Bank of India, told BloombergQuint. “It’s a step in the right direction.”

Saurabh Mukherjea of Marcellus Investment Managers, agreed. “The LIC IPO and the very aggressive disinvestment target are obviously linked.”

The LIC IPO will have to happen for the Rs 2.1-lakh-crore divestment number to be a hit.
Saurabh Mukherjea, Founder, Marcellus Investment Managers

Finance Secretary Rajiv Kumar told reporters that the government expects about Rs 90,000 crore from stake sale in LIC and IDBI Bank. Given that it’s holding in the lender is worth nearly Rs 18,000 crore at current prices, the government could fetch about Rs 72,000 crore from LIC divestment.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.