India Shifts Focus from Privatization to State Firm Revitalization

INIndia|

Indian Prime Minister Narendra Modi's government is abandoning its ambitious privatization plans in favor of significant investments in struggling state-run companies. Reports indicate that New Delhi is set to inject approximately $1.5 billion into rescue packages for two state-owned enterprises after unsuccessful attempts to privatize them.

The administration has also paused privatization efforts for at least nine state-run entities, including Madras Fertilizers and the Fertilizer Corporation of India, following pushback from various ministries. Additionally, the government plans to allocate between $230 million to $350 million to modernize the fleet of Pawan Hans, a helicopter operator that has failed to attract private buyers.

This shift comes after years of promoting a privatization agenda aimed at reducing state involvement in business. Following Modi's re-election in 2024, pressures from political allies and employee unions concerned about job security have influenced the government’s decision to revitalize struggling firms instead.

Historically, Modi's administration has achieved limited success in privatizations, with only three major transactions since the launch of its privatization strategy in 2021. Recent fiscal adjustments indicate a reduction in pressure to privatize state assets, as the federal deficit is projected to decline, enabling the government to divert resources toward reviving key state-run firms instead.

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