Context

• India’s fiscal management in 2026–27 faces challenges arising from global economic uncertainty, high energy prices and concerns over a deficient monsoon.
• Rising expenditure commitments and modest revenue growth have increased the importance of alternative revenue sources.
• In this context, disinvestment and asset monetisation have emerged as important instruments for strengthening government finances and advancing economic reforms.
• The proposed sale of the government’s stake in IDBI Bank could help exceed the annual disinvestment target while reinforcing investor confidence.

Disinvestment Performance and Fiscal Pressures

• According to DIPAM data, the Centre mobilised ₹62,124 crore through disinvestment and asset monetisation between April and September 2026, including ₹55,757 crore from disinvestment.
• This represented 78% of the annual budget target of ₹80,000 crore, even before accounting for IDBI Bank sale proceeds.
• However, fiscal pressures remain significant. Net tax revenue grew by only 3.4% and non-tax revenue by 3.2% between April and August 2026, while capital expenditure increased by over 18%.
• The fiscal deficit had already reached 42% of its budgeted level, highlighting the need to balance development spending with revenue mobilisation.
• Disinvestment can provide additional resources without increasing government borrowing. Nevertheless, asset-sale proceeds are generally non-recurring and cannot replace sustainable revenue growth.

Disinvestment as a Structural Reform

• Disinvestment should not be viewed merely as a means of meeting fiscal targets.
• It is a structural economic reform aimed at unlocking public assets, improving corporate governance, widening ownership and introducing market discipline.
• The 2021 New Public Sector Enterprise Policy envisages a bare minimum presence of public-sector enterprises in strategic sectors, encouraging private participation elsewhere.
• Similarly, the National Monetisation Pipeline (NMP) seeks to unlock capital from mature public assets.
• NMP 2.0 has established a target of ₹16.72 lakh crore for FY2026–30, following the achievement of 90% of Phase 1's target.
• The 2022 LIC IPO demonstrated how public offerings could attract first-time retail investors and policyholders, broadening participation in capital markets.
• While monetisation unlocks value without necessarily transferring ownership, privatisation involves transferring government ownership or control to private investors.

Demand-based Approach

• Until October 2026, disinvestment receipts had largely come through Offer for Sale (OFS) mechanisms, which broaden ownership without fundamentally changing enterprise management.
• The proposed IDBI Bank strategic sale, following Air India's privatisation in 2022, represents a significant step towards deeper private-sector participation.
• It could establish the foundation for Privatisation 2.0, based on investor participation, professional management and time-bound implementation.
• Two reforms could strengthen this approach.
  • First, the government should adopt a demand-based disinvestment strategy, assessing investor interest before selecting enterprises for sale.
  • Priority should be given to companies attracting credible bids at reasonable valuations. Investor feedback could help identify regulatory and procedural obstacles.
  • Second, a rolling three-year privatisation programme would provide predictability and sufficient time for investors to conduct due diligence, encouraging wider participation and better price discovery.

Calibrated Disinvestment and Institutional Reform

• Since privatising several public-sector enterprises may take years, calibrated disinvestment can serve as an interim measure.
• According to CII estimates, reducing government ownership to 51% across 95 listed PSEs could generate approximately ₹9 lakh crore, while retaining the government's position as the largest shareholder.
• Enterprises with government holdings of 75% or less could be prioritised during the first two years, followed by those with higher holdings.
• A dedicated institutional body, comprising a ministerial board, industry experts and professional management, could coordinate the process, ensure accountability and minimise administrative delays.
• However, decisions must consider strategic importance, financial viability, employment and public interest.

Fiscal Prudence and the Way Forward

• Disinvestment cannot justify fiscal complacency. Economic shocks can increase deficits and public debt, with consequences extending beyond the immediate crisis.
• Excessive dependence on asset sales could also undermine sustainable fiscal management.
• The government must maintain fiscal discipline, strengthen revenue mobilisation and manage borrowing responsibly.
• Adequate resources must remain available for healthcare, education and infrastructure without crowding out private investment.
• Transparent valuation, competitive bidding, regulatory certainty and safeguards against undervaluation are equally essential to ensure that public assets generate fair returns.

Conclusion

• Disinvestment and asset monetisation can strengthen India's public finances while improving public-sector efficiency.
• The proposed IDBI Bank sale offers an opportunity to exceed annual targets and reinforce investor confidence.
• However, lasting benefits require a transparent, demand-driven and time-bound privatisation framework, supported by professional management and institutional accountability.
• Ultimately, disinvestment must advance both fiscal consolidation and structural economic reform.
• Combining asset sales with sustainable revenue growth and responsible expenditure can encourage private investment, unlock public wealth and support India's long-term development.