Disinvestment as key economic strategy

Seven months into 2026-27, the fiscal year has been shaped by global uncertainty, high energy prices and worries over a deficient monsoon. Against this backdrop, disinvestment and asset monetisation have helped in navigating a challenging fiscal year. While receipts were already on course to meet the budget target, the government’s approval of the sale of its share in the IDBI Bank on October 14 makes it likely that the target will be exceeded. For the industry and investors, the receipts are a signal of the government’s continued commitment to reforms and a larger role for the private sector. This year so far, the disinvestment trajectory has progressed well, even before the IDBI stake sale. According to DIPAM data, the Centre mobilised ₹62,124 crore in April-September 2026 through disinvestment and asset monetisation, of which ₹55,757 crore came from disinvestment. These collections had already reached 78% of the full-year budget target of ₹80,000 crore. With the IDBI proceeds, the collections are to head past the target.

This comes at a time when the government looks to diversify its revenue sources amid rising expenditure commitments. Net tax revenue rose by a modest 3.4% in April-August 2026 and non-tax revenue by 3.2%, while capital expenditure was up by over 18%. Overall, the fiscal deficit has already reached 42% of the budgeted levels which implies a tight balance between revenue shortfalls and spending risks.

However, disinvestment should not be seen merely as a tool for meeting fiscal targets. It is a policy choice aimed at unlocking greater value from public assets, widening public ownership, and improving efficiency and governance through greater market discipline. The 2022 LIC IPO which drew in many first-time retail investors and policyholders remains a prime example.

This was precisely the rationale behind the government’s 2021 New Public Sector Enterprise (PSE) Policy which envisages a “bare minimum presence” of PSEs in strategic sectors. Likewise, the National Monetisation Pipeline (NMP) re-engines capital via mature public assets. A target of ₹16.72 lakh crore has been set under NMP 2.0 for FY26-30 after having achieved 90% of its Phase 1 goal.

Demand-based approach

This year, however, until this month, receipts had come mainly through Offer for Sale (OFS) measures which help to broaden ownership but keep the status quo on an enterprise’s operations. The strategic sale of the IDBI Bank since Air India in 2022 is an encouraging sign. From an industry perspective, the IDBI sale is more than a one-off sale. It is one of the largest Foreign Direct Investment (FDI) deals in India’s financial sector and constitutes as the first step towards a ‘Privatisation 2.0’ framework. More importantly, this framework is premised on being investor-led, professionally managed and time-bound. Two changes would help to turn into a template.

First, the selection criteria for disinvestments of PSEs should move to a demand-based approach instead of being led by the government. It would work better to first gauge interest across a wider pool and prioritise PSEs that draw strong bids at expected valuations, with structured investor feedback flagging procedural and regulatory hurdles early. Second, a rolling three-year privatisation stream, based on investor interest and the government’s strategic priorities, would give investors time for due diligence, which means deeper participation and better price discovery.

Given the fact that privatisation of several PSEs is a long journey, calibrated disinvestment could serve as an interim measure. CII analysis suggests that bringing the government’s stake down to 51% across 95 listed PSEs could fetch about ₹9 lakh crore, with the government remaining the single largest shareholder. PSEs where the government holds 75% or less could be taken up in the first two years, followed by those with higher government holdings. A dedicated body, with a ministerial board, industry experts as advisers and a management team, could steer the process.

To be sure, none of the above makes a case for fiscal complacency. Deficits and public debt tend to rise in uncertain times and stay elevated long after the shock subsides. Staying on the path of fiscal prudence is essential to ensure that the government can continue investing in health and education without crowding out private investment. 

Amidst various global headwinds, a healthy progress on disinvestments with more big-ticket sales such as the IDBI will provide the Centre the required cushion to stay on course with fiscal consolidation. 

Chandrajit Banerjee is Director General, Confederation of Indian Industry