{"id":303932,"date":"2024-07-09T19:27:23","date_gmt":"2024-07-09T13:57:23","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=303932"},"modified":"2024-07-09T19:27:23","modified_gmt":"2024-07-09T13:57:23","slug":"monetization-opportunities-for-the-government","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/monetization-opportunities-for-the-government\/","title":{"rendered":"Monetization Opportunities for the Government"},"content":{"rendered":"

Source<\/strong>-This post on Monetization Opportunities for the Government <\/strong>has been created based on the article \u201cThe government\u2019s stake-selling agenda: If not now, then when?\u201d<\/strong> published in \u201cLiveMint\u201d<\/strong> on 9 July 2024.<\/p>\n

UPSC Syllabus-GS Paper-3<\/strong>– Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.<\/p>\n

Context<\/strong>– Stock markets have consistently hit new highs, pushing total equity wealth to record levels. Promoters have taken advantage of higher valuations, selling approximately $4 billion worth of stock in just the last two months.<\/p>\n

The government aims to raise about $6 billion through divestment in 2024-25, marking a significant increase from previous years. This shift is part of a strategy to effectively boost economic resources through asset monetization.<\/p>\n

What has been the impact of the recent surge on PSU stocks and banks?<\/strong><\/h2>\n

1) Market capitalization of PSUs nearly doubled from $404 billion in 2022-23 to $804 billion currently.<\/p>\n

2) PSUs have achieved record-high returns on equity, with profits expected to reach about 2% of GDP.<\/p>\n

3) Most stocks of PSUs and PSBs have seen a strong increase.They have outperformed both private companies and the overall market.<\/p>\n

What opportunity does it present for the government to monetize its stakes?<\/strong><\/h2>\n

1) Strengthening Finances and Infrastructure<\/strong> -The rise in PSU stock prices provides a chance to sell government stakes and invest the proceeds in the economy. Monetizing these assets will strengthen government finances, support infrastructure projects, and create jobs.<\/p>\n

2) Enhancing Market Liquidity and Public Shareholding<\/strong> -Reducing the government’s stake in PSBs below 75% not only aligns with SEBI’s regulations but also enhances market liquidity. Despite a surge in market capitalization, public shareholding in PSU stocks remains low. This situation presents an opportunity for state-held listed entities to meet SEBI’s minimum public shareholding norms.<\/p>\n

What are the challenges in the disinvestment process?<\/strong><\/h2>\n

Disinvestment faces challenges such as multiple stakeholders, lengthy regulatory processes, global economic uncertainties, political opposition, and concerns about selling off national assets.<\/p>\n

A detailed article on Disinvestment in India can be read here.<\/a><\/p>\n

What should be the way forward?<\/strong><\/h2>\n

1) Offer-for-sale (OFS) mechanism<\/strong> -The government can sell stakes quickly using the offer-for-sale (OFS) mechanism. This allows for faster transactions through special stock exchange windows.<\/p>\n

2) Block Deals<\/strong>-It could opt for block deals to sell significant stakes at once or sell smaller quantities in the secondary market. Over the past decade, approximately $37.5 billion has been raised from minority stake sales out of a total of around $50 billion from divestments.<\/p>\n

3) Strategic Focus on Stake Sales and Governance<\/strong>– The government should prioritize stake sales over relying solely on PSU dividends. It should focus on governing, not managing non-strategic businesses.<\/p>\n

Question for practice<\/strong><\/p>\n

What opportunity does it present for the government to monetize its stakes? What are the challenges in the disinvestment process? What should be the way forward?<\/p>\n","protected":false},"excerpt":{"rendered":"

Source-This post on Monetization Opportunities for the Government has been created based on the article \u201cThe government\u2019s stake-selling agenda: If not now, then when?\u201d published in \u201cLiveMint\u201d on 9 July 2024. UPSC Syllabus-GS Paper-3– Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Context– Stock markets have consistently hit new… Continue reading Monetization Opportunities for the Government<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,167],"tags":[216,8184,10501],"class_list":["post-303932","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-economy-subject","tag-gs-paper-3","tag-indian-economy","tag-live-mint","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/303932","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=303932"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/303932\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=303932"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=303932"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=303932"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}