New Delhi: In a significant policy recommendation, the Economic Survey has proposed amending the Companies Act to lower the government's minimum shareholding requirement in state-owned companies from the current level to just 26%. This strategic move, according to the Centre's top economist, could substantially enhance the government's ability to generate higher non-tax capital receipts through increased disinvestment revenues.
Rationale Behind the Stake Reduction Proposal
Chief Economic Adviser V Anantha Nageswaran explained the reasoning behind this recommendation during a detailed discussion. "In all these years, the government maintained a clear stance that markets were performing exceptionally well, and it wanted to allow market capitalisation to rise naturally," Nageswaran stated. "Public sector stocks were outperforming general market indices, and the government was simultaneously collecting substantial dividends from the strong operational performance of these public sector entities. Consequently, there was no immediate revenue-driven impulse to pursue aggressive disinvestment strategies."
Future Benefits of Reduced Government Stake
The Economic Survey advocates this policy shift for multiple forward-looking reasons. "We are proposing this change primarily to augment non-tax capital receipts in the coming years," Nageswaran elaborated. "Additionally, this approach allows us to explore ways to inject greater managerial efficiency into these sectors. Essentially, it represents a comprehensive solution we have presented for consideration."
Addressing Current Disinvestment Challenges
This suggestion emerges against the backdrop of the NDA government's modest privatisation track record, despite its established policy to exit non-core business areas. If implemented, the proposed amendment would enable the Centre to dilute its stake in numerous listed entities where it currently maintains holdings just above the 51% threshold.
Current Government Holdings in Key PSUs:
- At least half-a-dozen public sector undertakings have government shareholding marginally above the 51% mark
- The Centre faces constraints regarding strategic disinvestment in companies like BPCL and Concor
- Multiple entities present opportunities for stake dilution if the legal framework is modified
External Recommendations for Disinvestment Acceleration
Parallel suggestions have emerged from various quarters advocating for intensified disinvestment efforts. Both NITI Aayog and prominent industry bodies such as the Confederation of Indian Industry (CII) have recommended that the government accelerate its privatisation initiatives. The resources generated through such disinvestment could then be strategically channeled into infrastructure development through enhanced capital expenditure programs.
Private Sector Investment Climate Assessment
When questioned about the perceived sluggishness in private sector capital expenditure, the Chief Economic Adviser provided crucial context. Nageswaran emphasized that "visibility of demand and certainty of demand represent critical considerations for private sector investment decisions." He further noted that "maintaining a gross fixed capital formation to GDP ratio of 30-31% under current economic circumstances does not constitute a low investment scenario."
"How can the pace of private capital expenditure possibly mirror the levels observed between 2003 and 2008, when the global economic landscape has transformed fundamentally?" Nageswaran questioned. "Available data indicates that the private sector has actually invested reasonably well during the 2024-25 fiscal period."
Algorithmic Transparency in the Gig Economy
In a related development, Nageswaran addressed concerns regarding platform aggregators in India's expanding gig economy ecosystem. He clarified that algorithms employed by these platforms must incorporate "human elements" into their operational frameworks. "We must ensure that the methodology for assigning duties to workers considers the human dimension and cannot remain purely formulaic," he asserted while responding to queries about algorithmic transparency advocated in the Economic Survey.
This emphasis on worker-friendly practices aims to promote sustainable growth within the gig economy while protecting labor interests through greater algorithmic accountability and transparency in platform operations.
