Mumbai:
In the last 10 months, India has raised $3.5 billion selling off pieces of state-run companies, more than such sales brought in during the previous four years.
Overburdened with debt, New Delhi desperately needs the cash, in part to finance development projects like roads, schools and hospitals that may help sustain the country's impressive growth. But there are serious doubts about whether India can maintain the trend, or accelerate it, as economists have urged.
Political parties, including some partners in the ruling coalition government, and unions representing workers at state-owned operations, oppose selling shares in public companies, not to mention outright privatization.
"The question is, is this is the big wave or will it be trench warfare?" Suman K. Bery, director general of the National Council of Applied Economic Research, said about the effort to sell shares in companies. "My sense is that it will be trench warfare."
The next indication of the government's strategy will come on Friday when Finance Minister Pranab Mukherjee presents the budget for the new fiscal year, which starts in April. Analysts will be watching to see how the Congress Party goes about cutting spending, which helped get it re-elected last year with a larger plurality.
After skirting the worst of the global financial crisis, Indian leaders are facing perhaps an even greater challenge: reducing a large fiscal deficit while raising more money to develop the country. Economists say India must speed up a series of long-pending economic reforms - in particular, selling large stakes in state-owned companies.
So far, policymakers are just scratching the surface. The government owns 473 companies worth about $500 billion, or 45 percent of the country's gross domestic product.
Economists say New Delhi could raise several billion dollars simply by reducing its stake to 90 percent in listed companies. And the government has said it plans to list an additional 60 profitable state-owned operations on the country's stock exchanges.
"It's a no-brainer," said Prithvi Haldea, chairman of Prime Database, a research firm based in New Delhi. "It's a simplistic way of raising capital for the government."
But Haldea, like many analysts, is skeptical that New Delhi will go far enough or move fast enough.
Economists' arguments have taken on added weight because India's efforts to bolster growth and reduce endemic poverty are running up against daunting fiscal realities. With government debt already at 80 percent of GDP, policymakers cannot easily borrow more money without significantly driving up interest rates and making it more difficult for the private sector to borrow.
The large debt has not been subject to the kind of criticism and scrutiny that has been directed at Greece and other European countries because India owes more than 90 percent of its debt to its own people. By contrast, more than 80 percent of Greek debt is owed to foreigners.
After independence in 1947, Indian leaders created companies like Steel Authority of India Ltd. to help the country leapfrog from its agrarian roots to an industrial future; they also nationalized private companies like Air India and most of the country's banks.
These companies became the backbone of political patronage, providing, for example, relatively secure and high-paying jobs to members of powerful unions. As a result, India's leaders have found it hard to let go of the companies.
Adding to the country's fiscal woes, in recent years India also raised public-sector wages and significantly increased spending on social programs and subsidies, including loan waivers for farmers. And last year the government cut taxes and subsidized exports to bolster the economy.
Those efforts appear to have helped lift growth to an annual pace of 7.9 percent in the three months ended Sept. 30 from 6.1 percent in the previous quarter.
But the increased spending has led to higher inflation - consumer prices were up 15 percent in December from a year earlier - while limiting the amount of money policy makers can spend on longer-term needs.
India's federal and state governments are already spending more money on interest payments, for instance, than on the country's armed forces and social services like education and health care.
"The money is not being used for the taxpayers of today," said Ila Patnaik, a senior fellow at the National Institute of Public Finance and Policy in New Delhi. "The more that we do that, the more we will be passing on our expenditures to future generations."
Government officials acknowledge that India is facing a budgetary squeeze and say that selling shares in state-owned enterprises will be an important tool to alleviate some of that strain.
"We are committed to bringing it down in the next two years," Sunil Mitra, a senior Finance Ministry official, said of the deficit. "If that is to happen you must have resources. Divestment has to be one of them."
Other policymakers assert that to improve the performance of state-owned companies and raise enough money to improve health care, education and the country's infrastructure, India will need to privatize scores of companies rather than just selling minority stakes as it has been doing.
Vijay Kelkar, chairman of the Finance Commission, which advises the government about taxes, said recently: "We have to think about the end-game, which is privatization, where the government fully gets out of the picture."