Disinvestment target for FY25 likely to be pegged below Rs 50,000 cr: Icra

Interim Budget 2024: For FY24, the Centre had set a disinvestment target of Rs 51,000 crore but has only been able to meet one-fifth of it so far

In the upcoming interim budget, the Centre is likely to set the disinvestment target for 2024-25 (FY25) below Rs 50,000 crore, rating agency Icra said in a report on Thursday. It said a higher aim may disrupt the budget math if there is a shortfall in receipts.

"Given the uncertainties involved in market transactions, it would be prudent to set a moderate target of sub-Rs 50,000 crore for FY2025, instead of a higher aim that may disrupt the budget math if there is a large shortfall in such receipts by the end of the fiscal, based on the past year trends," the agency said in its "Expectations- Interim Budget 2024-25" report.

For FY24, the Centre had set a disinvestment target of Rs 51,000 crore but has only been able to meet one-fifth (Rs 10,050 crore) of it so far. Strategic sales of a host of Central Public Sector Enterprises (CPSEs), including Shipping Corporation of India (SCI), NMDC Steel Ltd, BEML, HLL Lifecare and IDBI Bank, are in the pipeline for completion in the current fiscal. However, the process of due diligence for these entities is yet to be completed.

For IDBI Bank, the Centre has received several offers, but the final clearance from the Reserve Bank of India (RBI) and the Centre has not been given to any of them till now. Moreover, the privatisation of BEML and SCI) faces public as well as political resistance.

Icra said that the disinvestment target of FY24 is likely to be undershot by Rs 36,000 crore. "The disinvestment process for major CPSEs such as IDBI Bank and Shipping Corporation is expected to only pick up in FY2025," it said.

On the receipts side, however, Icra said that the Centre's collections may exceed by around Rs 0.5 trillion, driven by robust direct tax and higher-than-budgeted dividend transfer by the RBI.

"We expect the GoI's gross tax revenues (GTR) to grow by a healthy 11 per cent in FY25, led by direct taxes and GST collections, even as the growth in excise and customs duty collections is likely to be subdued," it said.

On the expenditure side, the total spending is likely to remain in line with FY24 estimates of Rs 45 trillion. This will be mainly due to a lower-than-budgeted capital expenditure.

The agency added that the Centre is likely to target a fiscal deficit of 5.3 per cent of the Gross Domestic Product (GDP) in FY25. In FY24, it is likely to be 6 per cent. In Budget 2023, it had set the target of 5.9 per cent for FY24.

"This would entail an absolute fiscal deficit of Rs 17.1 trillion in FY25, a welcome decline from the Rs 17.9 trillion budgeted by the GoI and expected by us for FY24," it said.

For FY26, Icra said that the target of 4.5 per cent would be challenging to meet owing to high capex.

"As per Icra's estimates, every 10 basis points (bps) of expansion in the fiscal deficit-to-GDP ratio would allow for an additional capex of Rs 32,400 crore," Icra said.