Compared to a single paragraph containing just 54 words in last year’s Budget speech, disinvestment has kind of taken centre stage in the finance minister's Union Budget speech this year. The importance of disinvestment in the FY2021-22 Budget is apparent not just because of the number of words assigned to it, but also because of the intent of the finance minister and her ministry’s non-traditional measures.

When it came to disinvestment and strategic sale, Sitharaman looked confident as she said; “In spite of Covid-19, we have kept working towards strategic disinvestment.” This was followed by the FM mentioning the names of more than half a dozen public sector undertakings (PSU) whose divestment would be completed in FY2021-22. “Other than IDBI Bank, we propose to take up the privatisation of two public sector banks (PSBs) and one general insurance company in the year 2021-22,” Sitharaman said. “In 2021-22 we would also bring the IPO of LIC.”

Between the current Budget and the previous one, the government has approved the policy of strategic disinvestment of central public sector enterprises (CPSEs), which provides a clear road map for disinvestment in all non-strategic and strategic sectors. “We have kept four areas that are strategic where bare minimum CPSEs will be maintained and [the] rest privatised,” said Sitharaman. “In the remaining sectors, all CPSEs will be privatised.”

If that was not enough of intent, Sitharaman added; “To fast forward the disinvestment policy, I am asking NITI (Aayog) to work out on the next list of central public sector companies that would be taken up for strategic disinvestment.” And the focus is not going to be the central government’s focus area alone. “To similarly incentivise states to take to disinvestment of their public sector companies, we will work out an incentive package of central funds for states,” she said.

What was more unusual this time round was the non-traditional area touched upon by the finance minister—land banks. “Idle assets will not contribute to AtmaNirbhar Bharat,” said Sitharaman. The non-core assets largely consist of surplus land with government ministries/departments and public sector enterprises. “Monetising of land can either be by way of direct sale or concession or by similar means,” said Sitharaman. “This requires special abilities and for this purpose, I propose to use a special purpose vehicle (SPV) in the form of a company that would carry out this activity."

If all of this was not sufficient, Sitharaman also added that in order to ensure timely completion of closure of sick or loss-making CPSEs, the government would introduce a revised mechanism that will ensure timely closure of such units. Through the mix of the above measures, the finance minister has estimated ₹1.75 lakh crore worth of receipts from disinvestment during FY2021-22.

The equity markets gave a standing ovation to Sitharaman’s Budget announcements, as the S&P BSE Sensex bounced up by nearly 2,479 points or 5.36% to the day’s high of 48,764.4 points. Similarly, the National Stock Exchange’s Nifty 50 also gained nearly 702 points, or 5.15%, to touch the day’s high of 14,336.35 points. At the close of trade, the Sensex and Nifty 50 both closed higher by nearly 2,314 points (+5.0%) and 647 points (+4.74%), respectively. When it comes to the highest Budget–day gains, the Sensex recorded its best day since 1997.

Nilesh Shah, group president and MD, Kotak Mahindra AMC, and chairman of the Association of Mutual Funds in India (AMFI) says that the growth-oriented Budget will support the equity market. Shah counts asset monetisation, strategic divestment, and auto scrapage policy among the factors positive for the market.

“Fixed income market will look forward to RBI's monetary policy as the gross borrowing programme was little on the higher side,” says Shah. “The Budget has laid the foundation for growth beyond FY2021-22 through selective protection to domestic industry and encouragement via performance linked incentive (PLI) scheme."

Agrees Jaspal Bindra, executive chairman, Centrum Group. “With a slew of key divestments in place, increase in FDI limits, an asset monetisation pipeline, planned increased borrowings and the proposed LIC IPO, the government is building up the arsenal it needs to keep inflows in place as well,” says Bindra. “Liquidity pressures will need to be kept under check owing to higher deficit and proposed increase in borrowings.”

For the record, the finance minister pegged the fiscal deficit at 9.5% of the GDP in FY2020-21, with a need of ₹80,000 crore which will be arranged through market borrowings. And, for FY2021-22, the fiscal deficit is pegged at 6.8% of the GDP, where the government will be borrowing ₹12 lakh crore from the market.

As a voice from the debt market, Rajeev Radhakrishnan, CIO for fixed income at SBI Mutual Fund, argues that debt sustainability within the Indian context as enunciated in the Economic Survey depends predominantly on sustaining a higher growth rate. “Towards this, the focus on growth revival through a larger fiscal outlay can't be faulted,” he says.

However, this definitely complicates the RBI's task of managing the government's borrowing programme. “Given the context of the expected normalisation of liquidity, an upward shift in the curve is unavoidable,” Radhakrishnan says. “In this context, continuation of market intervention operations would determine the new trading band for sovereign securities.”

Going back to disinvestment, P.N. Vijay, investment banker and founder of PN Vijay Financial Services, said during a Fortune India-editorji webcast that 10% divestment of stake in LIC alone could fetch the government a whopping ₹2 lakh crore–₹3 lakh crore. “And, the deficit woes would not matter at all,” he said.

On the same show, Ashish Gumashta, MD and CEO of Julius Baer India, called the growth Budget as one with its ear to the ground. “The equity market rally so far has been in the non-PSU stocks,” said Gumashta. “We could see PSU stocks rallying in the coming fiscal.”

While the finance minister has set the ball rolling, investors need to be mindful of the risks that are inherent in the market and investing, which were also articulated in the Economic Survey released on Friday.

According to the Survey, higher FDI and FPI inflows, and a weak U.S. dollar amid global monetary easing and fiscal stimulus packages were factors that contributed to buoyancy in the Sensex and Nifty 50, resulting in India’s market capitalisation to GDP ratio crossing 100% for the first time since October 2010. “While stock markets value the potential future growth, these elevated levels still raise concerns on the disconnect between the financial markets and real sector,” the Survey said.

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