(a) What are the various methods of privatisation? Point out the methods adopted by the government for disinvestment in India…

India’s post-1991 reform trajectory transitioned the state from a dominant producer to a facilitator, anchoring fiscal stability and external competitiveness through disinvestment, trade policy revamping, and fiscal discipline frameworks.

Methods of Privatisation and India’s Disinvestment Experience

Privatisation involves transferring ownership, management, or control of public sector enterprises (PSEs) to the private sector. The primary methods include Initial Public Offerings (IPOs) and Further Public Offerings (FPOs), strategic sales with management control transfer, share buybacks, Employee Stock Ownership Plans (ESOPs), and direct asset sales or long-term concessioning.

In India, the Department of Investment and Public Asset Management (DIPAM) executes disinvestment through two distinct routes: minority stake sales (via Offer for Sale, CPSE Exchange Traded Funds, and Bharat-22 ETF) and strategic disinvestment, involving the transfer of 50% or more equity along with management control (such as Air India and NINL). The National Monetisation Pipeline (NMP) further supplements this via brownfield asset leasing.

Disinvestment proceeds are channeled into the National Investment Fund (NIF) to finance social infrastructure, capital expenditure, and Public Sector Bank (PSB) recapitalisation. However, proceeds have persistently missed Budget Estimates (BE). For instance, against a BE of ₹1.75 lakh crore in FY22, actual receipts stood at ₹13,534 crore, and in FY24, receipts yielded roughly ₹16,500 crore against a BE of ₹51,000 crore. Reliance on minority sales and cross-holdings between Central Public Sector Enterprises (CPSEs) often serves as a stop-gap for fiscal deficits without delivering true operational autonomy, underscoring the need for genuine strategic exits.

Expectations from Foreign Trade Policy (FTP) 2021-26

The Foreign Trade Policy (extended into FTP 2023) sets an ambitious target of $2 trillion in total exports (merchandise and services combined) by 2030, shifting from discretionary incentives to a remission- and dialogue-based regime. Key expectations include:

First, mainstreaming districts as export engines through the "Districts as Export Hubs" (DEH) initiative, linking grassroots artisans and MSMEs to global markets. Second, integrating cross-border e-commerce by raising consignment limits and creating designated e-commerce export zones. Third, rationalising the Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) licensing framework to facilitate high-tech exports and dual-use technology integration. Fourth, institutionalising rupee trade settlement mechanisms to navigate geopolitical currency risks and expanding the Authorized Economic Operator (AEO) scheme for trade facilitation.

Crucially, the FTP aligns with Atmanirbhar Bharat and the Production-Linked Incentive (PLI) schemes to enhance domestic manufacturing depth. Nonetheless, bridging non-tariff barriers, lowering logistics costs from ~14% to 8% of GDP, and addressing sectoral export gaps in labour-intensive segments remain vital.

FRBM Act: Features, Trajectory, and Fiscal Consolidation

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, established a statutory framework to institutionalise fiscal prudence. Its key features include mandating a fiscal deficit target of 3% of GDP, the elimination of the revenue deficit, statutory disclosures (Macroeconomic Framework Statement, Fiscal Policy Strategy Statement, and Medium-Term Fiscal Policy Statement), and reporting of contingent liabilities. Following the N.K. Singh Committee recommendations (2017), the framework shifted focus to general government debt (60% of GDP; 40% for the Centre) and introduced specific "escape clauses" permitting 0.5% deficit relaxation during structural reforms, national security emergencies, or severe natural calamities.

The Act witnessed initial success during 2003–2008, bringing the fiscal deficit down to 2.54% in FY08. However, the 2008 Global Financial Crisis triggered a counter-cyclical pause, and the COVID-19 pandemic necessitated extensive fiscal expansion, pushing the deficit to 9.2% of GDP in FY21. The framework is frequently critiqued for its procyclical nature and mechanical targets that squeeze capital expenditure during downturns. The Centre has since adopted a revised consolidation glide path targeting a fiscal deficit below 4.5% of GDP by FY26 (reaching 5.6% in FY24).

Ultimately, non-debt capital receipts from disinvestment directly support FRBM deficit compliance, while export growth under the FTP generates the revenue buoyancy necessary to achieve sustainable fiscal consolidation without compromising developmental expenditure.