Asset sales to fund govt spending spree?

India is likely to spend more next fiscal year than this year’s budgeted $415 billion and prioritise infrastructure projects, relying on asset sales of around $40 billion for some of the funding, two people with knowledge of the plan told Reuters.

After largely keeping its purse strings in check as the coronavirus pandemic choked businesses and threw millions out of jobs, Prime Minister Narendra Modi’s government is keen to bring the economy back onto a solid growth path with the budget to be presented on Feb. 1.

Actual spending in the current fiscal year ending March 31 could be lower than the original target of 30.4 trillion rupees, but will be higher than last year’s 26.86 trillion rupees, one of the sources said.

“Supporting growth (and) infrastructure spending is the priority now, not fiscal-deficit math,” said one of the sources.

“But it is not that the spending will suddenly increase from 30 to 35 trillion rupees (when) our revenues are falling. The only ways to generate funds are through asset sales and borrowing.”

Both sources declined to identified as they were not authorised to discuss budget deliberations.

The Ministry of Finance did not respond to an email seeking comment.

India had aimed to raise more than $28 billion this fiscal year by selling stakes in companies such as Bharat Petroleum Corp Ltd, Container Corp of India, Shipping Corp of India and Air India, and by listing Life Insurance Corp, but the pandemic delayed the process.

Finance Minister Nirmala Sitharaman told Reuters early this month that the economy would expand in the next financial year and that if “I don’t spend now the revival is going to get deferred and we can’t afford that”.

For the current fiscal year, India’s deficit is likely to rise to 12 trillion rupees to 13 trillion rupees, much higher than the budgeted 7.9 trillion, mainly due to a revenue shortfall of 5 trillion rupees to 6 trillion rupees, said one of the sources.

India’s economy contracted a record 23.9% in the June quarter, before recovering slightly to contract 7.5% in September quarter.

Source link