India’s budget math brightens with asset sales target in sight
India's fiscal position for FY 2026-27 has improved compared to earlier concerns, with the government on track to exceed its budgeted asset-sale (disinvestment and asset-monetisation) target
This would mark the first time since FY 2018-19 that the budgeted disinvestment goal has been met or exceeded
Stronger-than-expected tax collections and a decline in global fertilizer input costs are easing pressure on government finances
Early progress includes proceeds from stake sales in public sector enterprises and asset monetisation under Infrastructure Investment Trusts (InvITs)
Officials expressed confidence in a positive fiscal outcome for the financial year
Disinvestment Policy — DIPAM and the New PSE Policy (2021)
Disinvestment refers to the sale or liquidation of government equity in Central Public Sector Enterprises (CPSEs). It is administered by the Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance, which handles strategic disinvestment, minority stake sales, and capital restructuring of CPSEs.
Key Details
- The New Public Sector Enterprise (PSE) Policy for Atma Nirbhar Bharat was approved by the Cabinet and notified on 4 February 2021, aiming to minimise government presence in PSEs across all sectors except four notified "strategic sectors" (defined by criteria of national security, energy security, critical infrastructure, and availability of minerals)
- Strategic disinvestment involves a transfer of management control (e.g., privatisation) to a private entity, requiring Cabinet Committee on Economic Affairs (CCEA) approval
- Minority stake sale involves selling a portion of government equity without transferring management control, typically via SEBI-regulated mechanisms — IPO, Offer for Sale (OFS), or Buyback
- Implementation guidelines (December 2021) task the Department of Public Enterprises, in consultation with NITI Aayog and the administrative ministries, with identifying CPSEs for closure or privatisation in non-strategic sectors
The government's asset-sale target for FY27 is being met largely through minority stake sales (OFS in listed CPSEs) and asset monetisation via InvITs, rather than large strategic privatisations, reflecting the more incremental approach disinvestment has taken since the roughly 50% shortfall years of the mid-2020s.
FRBM Act — Fiscal Deficit and the Shift to Debt-to-GDP Anchoring
The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 provides the statutory framework for India's fiscal consolidation path, setting targets for the fiscal deficit and, more recently, the debt-to-GDP ratio.
Key Details
- The N.K. Singh Committee (2016-17) reviewing the FRBM Act recommended a debt-to-GDP ratio of 60% (40% for the Centre, 20% for states) as the primary fiscal anchor, alongside a fiscal deficit target of 3% of GDP
- Under the post-pandemic glide path, the Union Budget for FY 2026-27 set the fiscal deficit target at 4.3% of GDP, continuing the decline from 4.8% (FY25 revised estimate) and fulfilling the 2021 commitment to bring the fiscal deficit below 4.5% of GDP
- From FY27 onward, the government has begun anchoring fiscal policy to the debt-to-GDP ratio (targeted at around 55-56% for FY27, glide path toward ~50% by FY31) as the primary metric, supplementing the fiscal deficit target
- Non-debt capital receipts, including disinvestment proceeds, directly reduce the fiscal deficit by adding to receipts without adding to government debt, unlike borrowings
Higher-than-budgeted disinvestment receipts, combined with stronger tax buoyancy and lower subsidy outgo, directly improve the fiscal deficit-to-GDP ratio, making it easier for the government to stay within its FRBM-mandated glide path for FY27.
Fertilizer Subsidy — Nutrient Based Subsidy (NBS) Scheme
Government subsidy on phosphatic and potassic (P&K) fertilizers is administered under the Nutrient Based Subsidy (NBS) Scheme, while urea remains under a separate statutory price-control regime. Fertilizer subsidy is one of the largest revenue expenditure items in the Union Budget and is highly sensitive to global commodity prices.
Key Details
- The NBS Scheme, effective from 1 April 2010, is administered by the Department of Fertilizers, Ministry of Chemicals and Fertilizers, and fixes per-tonne subsidy based on the nutrient content (Nitrogen, Phosphorus, Potassium, Sulphur) of each fertilizer grade, covering 25-28 grades of P&K fertilizers including DAP
- Urea continues to be sold at a government-notified Maximum Retail Price (MRP) under a separate statutory control mechanism, with the subsidy being the difference between delivered cost and the fixed MRP
- Global urea and DAP prices are a key swing factor in the subsidy bill since India imports a significant share of its P&K raw materials and finished fertilizer
- A sharp decline in global urea prices (from an April peak to well below $400/tonne) directly reduced the projected fertilizer subsidy bill for FY27 compared to earlier-year estimates
Easing global fertilizer costs reduce the subsidy burden on the revenue expenditure side of the budget, which — combined with stronger tax collections and disinvestment overperformance — is cited as a key reason the fiscal outlook has "brightened."
- FY 2026-27 Budget Estimate for disinvestment/asset-monetisation: ₹80,000 crore
- Government is on track to exceed this target for the first time since FY 2018-19
- Fiscal deficit target, Union Budget FY27 (BE): 4.3% of GDP, down from 4.4% (FY26 RE) and 4.8% (FY25 RE)
- FRBM Act enacted: 2003; N.K. Singh Committee review: 2016-17 (recommended 60% debt-to-GDP, 40% Centre / 20% states)
- NBS Scheme for P&K fertilizers effective from: 1 April 2010
- New PSE Policy for strategic disinvestment approved: 4 February 2021