A top official told ET that the budget is likely to relax long-term capital gains tax and dividend distribution tax norms, besides setting a clear road map for the government to sell or significantly cut its stake in select PSUs and giving the proceeds to other shareholders for funding their capex.
“The focus will be to create more space for private sector through disinvestment and asset monetisation,” the official said. Finance minister Nirmala Sitharaman will present the Union Budget on February 1.
“Disinvestment proceeds from listed PSUs with other stakeholders cannot be sent to the Consolidated Fund of India. This money should go back to them to help fund their expansion plans,” the official explained.
NITI Aayog had proposed disinvestment in 26 sick PSUs, out of which the Cabinet has approved almost 20. However, delays at line ministries have meant disinvestment in the current financial year so far has remained low.
While work has started on divestment of Air India, Bharat Petroleum and Concor, efforts are being made to bring down stakes in other PSUs to below 51%, including in BEML, Pawan Hans and Projects India.
Against the disinvestment target of Rs 1.05 lakh crore for FY20, the government has raised Rs 18,094.59 crore so far. That compares with Rs 84,972.16 crore obtained from disinvestment in FY19 against the budget estimate of Rs 80,000 crore.
With two months to go, the government is aggressively pushing to monetise assets of the Centre and central public sector enterprises, including guest houses, office space, apartments, factories, land, power transmission assets and sports stadiums.
Stock market experts have sought abolition of long-term capital gains tax on equities and mutual funds, and a shift from dividend distribution tax levied on companies to taxing dividend in the hands of investors. According to the official, pushing investment demand in the domestic market and increasing exports can help improve the economy. “The worst is over and the economy will start looking up in the fourth quarter.”
India’s exports fell 1.96% to $239.29 billion in the April-December period and imports declined 8.9% to $357.39 billion, leaving a trade deficit of $118.10 billion. It is estimated that overall exports for the current financial year will be $330-$340 billion, compared with last year’s level of $331 billion.
Economic growth fell to a 26-quarter low of 4.5% in the second quarter. The government has projected FY20 growth at 5%, which is a multi-year low.