Anticipation Grows as Experts Suggest Bank Privatization Unlikely in Upcoming Union Budget Vote on Account
As the country awaits the Union Budget scheduled for February 1, 2024, financial experts express skepticism regarding the inclusion of bank privatization announcements. Given that this budget is categorized as a vote on account, analysts assert that major policy initiatives, particularly the contentious issue of bank privatization, may not find a place in the interim budget.
Economic Veterans Share Insights:
Renowned economist and former finance secretary, Montek Singh Ahluwalia, emphasized the nature of interim budgets, stating, “This is an interim Budget; so it’s like a non-Budget you are not supposed to announce any new thing.” He underscored the tradition of interim budgets primarily echoing election manifestos without introducing groundbreaking policies.
Finance Minister Nirmala Sitharaman further clarified the government’s stance on December 7, asserting that the upcoming budget would lack “spectacular announcements.” She highlighted that the regular budget with substantial policy declarations would be presented in July, post the general election.
Former Deputy Governor of the Reserve Bank of India, R Gandhi, echoed similar sentiments, emphasizing the limited scope of the upcoming vote on account. “It is only a vote on account, not a budget. So don’t expect any policy initiatives,” Gandhi remarked.
Recap of Previous Budget Announcements:
The backdrop of this anticipation stems from Sitharaman’s previous budget presentation in 2021-22, where she outlined the government’s intent to privatize public sector banks (PSBs) as part of a broader disinvestment strategy aimed at generating Rs 1.75 lakh crore. However, the proposed privatization, except for IDBI Bank, did not materialize, raising questions about the timing and implementation of such decisions.
Financial Stability of Public Sector Banks:
Notably, industry experts have assessed the current situation of public sector banks and suggest that, at present, they are in a robust financial position. Former finance secretary Subhash Chandra Garg affirmed, “There is no chance to touch issues like bank privatization in the interim Budget.” He pointed out that banks are enjoying favorable conditions, marked by improved earnings, successful fund raising, and strong capital positions.
A Moneycontrol analysis of the July-September FY24 quarter reveals double-digit profits and enhanced asset quality in India’s banking sector. Major banks, including the State Bank of India (SBI), Bank of Baroda (BoB), and Punjab National Bank, reported substantial profits, reflecting a positive trend in the industry.
Government’s Stance and Future Projections:
A finance ministry official indicated that critical decisions, including bank privatization, are likely to be deferred until after the general elections. The official stated, “Every government makes the decisions at the right time. So, I don’t think that anything is going to happen before the general elections.”
As the nation awaits the Union Budget on February 1, 2024, the financial landscape remains poised for potential shifts post the general elections, leaving experts and stakeholders keenly observant of the government’s future policy directions.
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