NEW DELHI: The deferment of divestment in the firms due to differences within the ruling coalition may also lead to downgrading of India's economic outlook, said the Institute of Economic Growth (IEG) in its monthly review of economic developments. The reforms program received a major blow Saturday with the cabinet deferring plans to sell the government's stake in Hindustan Petroleum Corporation Ltd. (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL) by three months. HPCL and BPCL account for 40 percent of India's oil market. The government owns 51 percent of Hindustan Petroleum and 66 percent of Bharat Petroleum. The latest setback to the country's privatization drive comes after the government ignored opposition to the sale of its stake in a telecom giant, an oil firm and the country's largest joint venture carmaker earlier this year. India plans to raise 120 billion from sales of shares in state-owned firms in the current financial year. It has repeatedly failed to meet targets in the past because of stiff protests from opposition parties and trade unions. IEG said that the current year budget target of 120 billion "may not be achievable" after the latest setback on the divestment front. The report said that bailout of three state-run financial majors - Unit Trust of India (UTI), Industrial Finance Corporation of India (IFCI) and Industrial Development Bank of India (IDBI) - could also result in higher fiscal deficit. "It could be well above the targeted level of 5.4 percent in the current fiscal year," it said. The government plans to rein in the federal fiscal deficit to 5.3 percent in the year ending March 31, 2003, from 5.7 percent in fiscal 2001-02. Millions of investors in the troubled UTI, India's largest fund manager heaved a sigh of relief after the government unveiled a major reform package to ease liquidity pressure. The package, which includes a fresh infusion of 145 billion to meet redemption liabilities, is aimed at streamlining the operations of the troubled financial giant. The government is now working on a 80-billion bailout package for beleaguered financial institution IFCI Ltd.
Source: IANS