Budget 2024: India needs to sell assets to support spending, JPMorgan says

India’s government needs to revive its asset monetization program to create revenue streams beyond taxes, which can help fund spending while keeping it on a fiscally prudent path, according to a top economist.“Over time it will be nice to see renewed focus on asset sales, monetization of infrastructure assets, and disinvestment as another source of revenue,” Sajjid Z. Chinoy, chief India economist at JPMorgan Chase & Co., told Bloomberg TV’s Menaka Doshi on Wednesday. “Over the next 10 years, India will have huge expenditure obligations.”

Prime Minister Narendra Modi, who returned to power last month with a weaker mandate, is under pressure to spend more to shore up voter support and meet the demands of his coalition partners.

The federal budget released Tuesday targeted a smaller fiscal deficit for this year on the back of a record dividend from the Reserve Bank of India and a surge in tax revenues.

Next year, the government aims to bring down the budget gap even further, which is necessary for India to win a credit rating upgrade. India’s debt is currently rated at the lowest investment-grade level.Chinoy said raising revenue through selling government assets would be more beneficial than raising taxes, which could impinge on demand. “The beauty of asset sales is that its effective like an asset swap, you are selling one asset to build a road or invest in human capital,” he said.The government’s attempts at big-ticket sales of state-run companies have yielded little success, forcing it to scale back its program to small stake offerings through stock exchanges. In the last budget, the government had set a target to raise 500 billion rupees through stake sales by March.