Fiscal resources and reforms need to be balanced: Tuhin Kanta Pandey, Secretary, DIPAM, Ministry of Finance

New Delhi: Mr Tuhin Kanta Pandey, Secretary, DIPAM, Ministry of Finance, Govt of India, today said that the government is not a business enterprise and has huge social responsibilities. It cannot be a micro player as well as a macro player all at the same time.

Addressing the Special Plenary Session at the FICCI 18th Annual Capital Markets Conference, CAPAM 2021- Beyond India @75: Accelerating Growth through Capital Market, Mr Pandey, said, “We need to balance the fiscal resources as well as reforms that we need to bring into the economy. Ultimately it will be the private sector that will drive the business environment.”

“After almost 17 years, India needs to see some privatisation. As much as the government would like to disinvest, we also need businesses to come forward and participate in our bidding process. Essentially, we really must create a market for public assets. A well-created market will happen when there is transparency, and competitive bidding, among others,” he said.

Further, Mr Pandey said that there have been delays and pushbacks because of COVID, but broadly, the disinvestment plan is on track. “The Finance Minister had named the enterprises (for disinvestment) in the Budget. We are striving to conclude the transactions; we are fairly open about it,” he said.

The new PSE policy mentions that the govt would like to retain a bare minimum stake for public enterprises in four strategic sectors. For the first time banking, insurance, and financial services, which used to be important segments, but were discussed separately from the other enterprises, have been brought together into one policy. For the first time even the bare minimum concept applies on the financial sector as well,” Mr Pandey said.

To some extent the government will always require more resources and we will also have to balance it with a fiscal stability and a macroeconomic stability. You cannot be profligate in terms of endless financing otherwise the inflationary impacts will hit us. This (PSE) policy says that we will have bare minimum in the strategic sectors, he added.

“Strategic disinvestment is going to be a primary model. However, that is not the only model. We cannot constrain the enterprises just because it is unable to put in additional capital. Additional capital will always be needed to grow. Unshackling of the enterprises from the budgetary constraints of the Central Government will do a lot of good to the growth of the enterprises, as well as in terms of generating employment,” Mr Pandey further added.

Mr Shardul Shroff, Chair, FICCI Stressed Assets Committee and Executive Chairman, Shardul Amarchand Mangaldas & Co said that COVID has had a deep impact on the Govt’s disinvestment programme, but the question is whether we need to have alternatives. Regarding disinvestments of certain public sector enterprises, Mr Shroff said, “A lot has been said regarding this (disinvestment) being a fiscal tool. It is better to have a revise strategy in terms of looking at it as a loss exercise rather than a profit taking exercise. A little change in strategy can make all the difference.”

Mr Arun Mehta, MD & CEO, SBI Capital Markets Ltd said that structural reforms by the Govt of India are stabilised. “Foreign investment is steady; banks are doing well – they are back to making higher profits than they were ever before. SEBI has been very forthcoming and accommodating and the result is that we have seen 27 IPOs from January onwards. Some of them have not only done well but are listed in premium prices,” he said.