Modi makes huge privatisation push to jumpstart economy

Bloomberg

India’s prime minister Narendra Modi is putting the flagging economy back on centre stage after announcing the biggest privatisation drive in more than a decade and making renewed attempts to ring fence the crisis-ridden shadow banking sector.
The country is in the midst of a deepening slowdown amid waning consumption — the bedrock of the $2.7 trillion economy. And while Modi has targeted transforming India into a $5 trillion economy by 2025, of late, most of his attention has been focussed on asserting a more muscular foreign policy and placating the Hindu majority — his main voting base — by scrapping autonomy in India’s lone Muslim-majority state of Jammu and Kashmir.
Indian authorities went into overdrive. The government decided to sell its entire stake in the country’s second-largest state refiner, and its biggest shipping company. It also approved a proposal to pare stakes below 51% in some companies and pushed for an introduction of a new industrial code bill. Meanwhile India’s central bank seized a troubled shadow lender to try and contain defaults from spreading in Asia’s third-largest economy.
“This is Modi’s renewed attempt to instill confidence in India’s economic potential,” said Priyanka Kishore, head of India and Southeast Asia Economics at Oxford Economics, Singapore.
She added it was imperative for the Modi government to announce these measures as it attempts to bridge a widening fiscal deficit following the dismal tax collections and cuts to corporate tax rates worth $20 billion.
Earlier this month Moody’s Investors Service cut the country’s sovereign debt outlook to negative amid concerns over slowing growth and revenues.
After winning a second consecutive term earlier this year promising rapid economic development, Modi is realising his popularity and support going forward hinges on passing tough reforms that unleash growth — and create jobs — in Asia’s third-biggest economy. The economy expanded 5% in April to June, the slowest in six years and a far cry from 8% seen just a year ago.
Modi is seeking to raise a record 1.05 trillion rupees from asset sales. He has so far has resisted big-ticket privatisation and restricted sales of its holdings to other state companies, including $5.14 billion sale of Hindustan Petroleum Corp to the biggest explorer Oil & Natural Gas Corp last year. Now his administration is selling the government’s entire stake in Bharat Petroleum Corp and Shipping Corp of India Ltd.
“The administration’s focus on getting the economy back on track comes as it plans to offer 324 companies including Tesla Inc and GlaxoSmithKline Plc incentives to set up factories in a bid to capitalise from the trade war between China and the US.