InvestorQ : Will the government increase their divestment target as means of enhancing revenues?
simran Kaur made post

Will the government increase their divestment target as means of enhancing revenues?

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Ayushi Kampani answered.
3 months ago
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This could be a very serious possibility. With Covid19 affecting people’s economic health, the government’s tax revenues are definitely going to take a huge hit. Government will need to utilise various other methods in order to fill the gap. The push towards more divestment seems to be the way to go. 

The expenditure that the government plans to incur during a year should reliably match with the revenue it plans to earn to finance it. However, the government plans for disinvestment in 2020 was definitely disrupted by the pandemic. Until November 2020, the government had managed to earn a total of Rs 6,179 crore through the disinvestment route. This is around 3% of the targeted Rs 2.1 lakh crore. A bulk of this money was planned to be raised by disinvesting a part of the government’s stake in the Life Insurance Corporation (LIC) of India. 

The government needs to get LIC ready for disinvestment, and that has been taking the time. Hence, the lesser than expected disinvestment receipts has made things difficult for the government this year, especially when one takes into account the fact that gross tax revenues between April and November 2020 have been at Rs 10.26 lakh crore, 12.6% lower than last year. While tax collections next year will improve, they will not improve to a level which can finance the spending ambitions of the government. In this scenario, the disinvestment receipts become very important.

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