Modi: Setting the divestment bar too high?

For the seventh year in a row India has failed to meet its divestment target. But as our graphics show, the government is still shooting for the stars.

In 1991, India started a campaign to sell government stakes in state-owned enterprises, part of its effort to liberalise the economy. These divestments have since become a significant source of income for the government and a core part of the budget every year. 

But they have never quite met the high targets the government has set.

India has had ambitious divestment targets in recent years, seeing these sales as an important way to improve the operational efficiency of public sector companies. 

Some state-owned companies put a huge burden on government expenditure, driven to inefficiencies by their monopoly power. It made sense to reduce India’s exposure to these bloated corporations.

Click the graphics below for a full view.

But the Indian government of Prime Minister Nardedra Modi appears to have gone too far — setting unrealistic divestment goals year after year.  The country failed to meet the annual target for the seventh consecutive year in the 2016-17 fiscal year, which ended on March 31, 2017.

The government has put the blame on market volatility and fluctuations in oil and commodity prices. But it does not have appeared to have learned its lesson — the government’s divestment target for the new fiscal year is Rp725 billion ($11.2 billion), a new record.

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