IPO similar to Aramco key to the success of budgetary mathematics in India

NEW DELHI: Finance Minister Nirmala Sitharaman is betting on the success of her fiscal math in a sale of shares of the country's largest state insurer.

Since tax revenues are reduced as a percentage of the total Budget for the third consecutive year, Sitharaman will depend on Rs 2.1 lakh crore ($ 29 billion) that it plans to raise by selling state assets to close the budget gap. It is likely that much of that, as much as Rs 90,000 crore, comes from the sale of shares of Life Insurance Corporation of India, which has total assets of $ 434 billion.

Pranjul Bhandari, chief economist of India at HSBC Holdings Plc in Mumbai, will need a lot of preparation before the sale of the big-bang stake can be made.

Changes to a law and the acceptance of employee unions are some of the preparatory work necessary to sell a stake in LIC.

There is a possibility that the sale of the share, which investors compared to Saudi Aramco's initial public offering (IPO), will not happen next year, and that could derail Sitharaman's budget calculations, analysts said.

There may be a possible slip, Bhandari told BloombergQuint. In mathematical terms, there could be a 0.3% slip of gross domestic product (GDP) in income if these asset sales do not take place.

Divestment targets have been lost several times in previous years.