{"id":66010,"date":"2026-02-05T18:24:14","date_gmt":"2026-02-05T12:54:14","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=66010"},"modified":"2026-02-05T18:24:54","modified_gmt":"2026-02-05T12:54:54","slug":"psu-disinvestment-growth","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/05-02-2026\/psu-disinvestment-growth","title":{"rendered":"PSU Disinvestment as a Pillar of Growth-Oriented Fiscal Consolidation"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/ Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Union Budget 2026\u201327 reiterates the government\u2019s preference for growth-led fiscal consolidation, balancing deficit reduction with sustained capital expenditure, and disinvestment.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Economic growth has been prioritised over fiscal deficit reduction to sustain demand and investment.<\/li>\n\n\n\n<li><strong>Capital expenditure and infrastructure spending<\/strong> have been protected due to their high growth multiplier effects.<\/li>\n\n\n\n<li>The fiscal deficit is projected at <strong>4.4% of GDP in FY26<\/strong> and <strong>4.3% in FY27,<\/strong> reflecting gradual consolidation.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is PSU Disinvestment?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>PSU disinvestment refers to the process by which the <strong>government reduces its ownership stake<\/strong> in Central Public Sector Enterprises (CPSEs).<\/li>\n\n\n\n<li>It can involve<strong> partial sale, strategic sale, or increase in public shareholding,<\/strong> while retaining or transferring management control.<\/li>\n\n\n\n<li>Disinvestment is<strong> distinct from privatisation,<\/strong> as ownership and control may still remain with the government.<\/li>\n\n\n\n<li><strong>Department of Investment and Public Asset Management (DIPAM):\u00a0<\/strong>\n<ul class=\"wp-block-list\">\n<li>DIPAM is a Department under the <strong>Ministry of Finance.<\/strong><\/li>\n\n\n\n<li>It deals with all matters relating to management of Central Government investments in equity including disinvestment of equity in Central Public Sector Enterprises(CPSE&#8217;s).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Modes of Disinvestment of CPSEs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Strategic Disinvestment:<\/strong> It implies the entire or substantial sale of Government shareholding of a CPSE along with<strong> transfer of management control.<\/strong><\/li>\n\n\n\n<li><strong>Minority Stake Sale: <\/strong>Minority stake sale in certain CPSEs are carried out without transfer of management control through various SEBI-approved methods like <strong>Initial Public Offer (IPO), Offer for Sale (OFS) and Buyback of shares etc.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Objectives of PSU Disinvestment<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>To <strong>mobilise non-tax revenue<\/strong> and reduce dependence on borrowing.<\/li>\n\n\n\n<li>To <strong>improve efficiency, productivity, and corporate governance<\/strong> in CPSEs.<\/li>\n\n\n\n<li>To enable the government to <strong>reallocate resources towards social and infrastructure sectors<\/strong>.<\/li>\n\n\n\n<li>To<strong> support fiscal consolidation <\/strong>without compressing productive expenditure.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Challenges in PSU Disinvestment<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Market-related constraints: <\/strong>Volatility in<strong> equity and debt markets<\/strong> affects valuation discovery and optimal timing of disinvestment.<\/li>\n\n\n\n<li><strong>Labour concerns: <\/strong>Resistance from employee unions stems from <strong>fears of job losses, wage restructuring,<\/strong> and dilution of social security.<\/li>\n\n\n\n<li><strong>Procedural delays: <\/strong>Lengthy approval processes, inter-ministerial coordination issues, and litigation delay execution.<\/li>\n\n\n\n<li><strong>Sector-specific investor limitations: <\/strong>Certain CPSEs operate in sectors with low profitability or high regulation, limiting investor appetite.\n<ul class=\"wp-block-list\">\n<li>Strategic disinvestment becomes difficult where long-term commercial viability is uncertain.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Operational inefficiencies of CPSEs:<\/strong> Persistent underperformance, high legacy costs, and outdated technology reduce asset attractiveness.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Transparency in timelines<\/strong> and methods will enhance investor confidence.<\/li>\n\n\n\n<li><strong>Cleaning up balance sheets, resolving legacy liabilities<\/strong>, and rationalising manpower before disinvestment will\u00a0 improve asset attractiveness.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/business\/growth-remains-priority-looking-at-more-psu-divestment-fm-sitharaman-10510065\/\" target=\"_blank\" rel=\"noopener\"><strong>IE<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> Context <\/strong><\/p>\n<li class=\"ms-5\"> The Union Budget 2026\u201327 reiterates the government\u2019s preference for growth-led fiscal consolidation, balancing deficit reduction with sustained capital expenditure, and disinvestment. <\/li>\n<p><\/p>\n<p><strong> About <\/strong><\/p>\n<li class=\"ms-5\"> Economic growth has been prioritised over fiscal deficit reduction to sustain demand and investment. <\/li>\n<li class=\"ms-5\"> Capital expenditure and infrastructure spending have been protected due to their high growth multiplier effects. <\/li>\n<li class=\"ms-5\"> The fiscal deficit is projected at 4.4% of GDP in FY26 and 4.3% in FY27, reflecting gradual consolidation. <\/li>\n<p><a href=\" https:\/\/www.nextias.com\/ca\/current-affairs\/05-02-2026\/psu-disinvestment-growth \" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-66010","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/66010","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=66010"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/66010\/revisions"}],"predecessor-version":[{"id":66013,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/66010\/revisions\/66013"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=66010"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=66010"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=66010"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}