TheNFAPost Podcast
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Finance Minister Nirmala Sitharaman did a mix of two great British prime ministers by first putting to use Winston Churchill’s famous line of “never let a crisis go to waste’ and giving a major push to privatization as Margret Thatcher did.

In a very bold step to fill its depleted coffers impacted by the Covid-19 pandemic, Sitharaman today announced Rs 1.75 lakh crore as the disinvestment target for FY 2021-22. 

Sitharaman said two PSBs and one general insurance company would be divested.

“Other than IDBI the government plans to take up two more banks for disinvestment. LIC IPO will come in 2022. All divestments announced so far, including Air India, BPCL, CONCOR, Pawan Hans, to be completed by 2022,” she said.

The disinvestment process of Air India has been pending for the past 20 years.

NITI Aayog will be given the task of preparing the next list of central public sector companies for disinvestment, Sitharaman stated. 

“Barring four strategic areas, PSUs in other sectors will be divested. All disinvestments announced so far will be completed in FY22. The NITI Aayog has been asked to work on the next list of central public sector companies for disinvestment,” Sitharaman said.

Dun and Bradstreet Global Chief Economist Arun Singh said the implementation of the disinvestment target is a challenge most of the time and hoped that the disinvestment target for FY22 is well implemented in a timely manner. 

Following this announcement, shares of public sector banks rose up to 3 percent.  Shares of the Central Bank of India rose over 5 percent, followed by SBI, Bank of Baroda, Canara Bank, among others. 

The Nifty PSU Bank index was up about 3 percent.

Last fiscal, Sitharaman had announced a disinvestment target of Rs 2.1 lakh crore, three to four times the usual targeted amount. 

The total disinvestment receipts so far have amounted to Rs 17,957.7 crore through minority stake sale in Central Public Sector Enterprises (CPSEs) and share buybacks, Finance Ministry data stated.

In September last year, the government had approved the disinvestment of 34 PSUs, but transactions were completed for eight. 

Transactions for four PSUs were halted as they are recommended for closure. Two of them were held up due to litigation, while transactions for 20 PSUs are in the process.

She said the foreign investment limit in the insurance space will be increased from the current 49 percent to 74 percent.

Under the new structure, Sitharaman said the majority of directors on board and key management persons will be resident Indians.

“Increase in FDI in the insurance sector to 74% a welcome move to provide a big boost to one of the major under-penetrated sectors,” said 

Bexley Advisors Managing Director Utkarsh Sinha said the hike in FDI cap in insurance will have a long-lasting impact in broadening insurance coverage in India, while also deepening the penetration of capital markets.

“Since insurance companies also serve as LPs to several private equities and VC firms, we can also expect a positive impact on the levels of private investments down the road,” he added.

Sitharaman said that the fiscal deficit for the financial year 2021 is expected to be around 9.5 percent. This will drop down to 6.8 percent of the GDP by FY 2022, she added.

The government has committed Rs 1.97 lakh crore for PLI schemes covering 13 sectors. Further, 7 textile parks will be launched over three years. Sitharaman said, ” A scheme of mega Investments Textile Park will be launched in addition to PLI Scheme which will create world-class infrastructure with plug and play facilities to enable global champions in exports.”

Director of Nangia Andersen Chirag Nangia said the move could help companies increase penetration and scale-up. 

Religare Insurance, Star Health, Future Generali Insurance, IDBI Federal Life, could see some shakeup after the change, he added.

Echoing the government’s effort to spend more on capital expenditure despite the resource crunch, Sitharaman announced a sharp increase of 34.5 percent in capital expenditure as compared to previous budget estimates, resulting in the allocation of ₹ 5.54 lakh crore.

 Sitharaman announced PM Aatmanirbhar Swasth Bharat Yojana with the allocation of Rs 64,180 crore over 6 years to develop health capacity.

Under the scheme, more than 17,000 rural and 11,000 urban health and wellness centers to be set up. Integrated public health labs to set up in 11 states.

The Finance Minister also announced the launch of the Urban Swachh Bharat 2.0 Mission with an outlay of Rs 1.41 lakh crore over 5 years. The Jal Jeevan Mission Urban to be launched at an outlay of Rs 2.87 lakh crore. The government to launch Mission Poshan 2.0, said Finance Minister to strengthen the nutritional content, delivery, outreach, and outcome.

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