A report from Bloomberg said India was mulling a plan to exit from some of the stakes it holds in ITC Ltd, Axis Bank Ltd and Larsen & Toubro Ltd. Citing three officials from the Finance Ministry, the report said the partial sale was needed to be done for the government to be able to raise funds.
The officials said the Finance Ministry is planning to get the approval of the Cabinet for the sale proposal as the administration is getting pressured to meet its INR 540 billion or USD 8.7 billion total share sale target in the year that will end March 31. They spoke on the condition of anonymity since the plans are not made public, the report said.
A final decision on the matter has not been given still and the sources did not specify a time period as to when the proposal would be approved. According to the report, the Indian government's attempt to establish a fund management firm for the stocks, which would later be used as collateral to obtain loans, had come to a standstill. The plan to set up the firm was begun two years ago.
The slowdown in economic growth faced by India is making a dent on the country's tax revenues, which placed more pressure on the government to divest some of its holdings in Larsen & Toubro, Axis and ITC in order to keep the budget deficit at manageable levels, the report said. This fiscal year, the goal of Prime Minister Manmohan Singh is to lower the gap to 4.8% of the country's gross domestic product.
India's investment grade credit rating is also threatened with its budget and trade shortfalls. This month, credit rating firm Standard & Poor's said it may downgrade its assessment of the country to junk in 2014 unless a government that can bring economic growth to the country will result in the scheduled general election in May, the report said.
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