Budget 2026: Can a demand-driven privatisation push help fund India’s capex plans?

As per convention, the Union Budget for 2026-27 will be presented on February 1.

Amid global economic uncertainty, the Confederation of Indian Industry (CII) has urged the government to adopt a calibrated privatisation strategy in the Union Budget 2026-27 to sustain capital expenditure and meet key development goals. The industry body said resource mobilisation through privatisation should focus on sectors where private participation can improve efficiency, bring in advanced technology and enhance global competitiveness.

Underscoring the importance of privatisation in the current economic environment, Confederation of Indian Industry Director General Chandrajit Banerjee said India’s growth momentum is increasingly being driven by private enterprise and innovation.

“A forward-looking privatisation policy, aligned with the vision of Viksit Bharat, will enable the government to focus on its core functions while empowering the private sector to accelerate industrial transformation and job creation,” Banerjee said.

Against this backdrop, CII has called for faster implementation of the government’s Strategic Disinvestment Policy, which envisages exiting all public sector enterprises (PSEs) in non-strategic sectors while retaining only a limited presence in strategic areas. The policy intent, CII noted, provides a clear direction for advancing the privatisation agenda.

To strengthen and speed up the process, CII has proposed a comprehensive four-point strategy.

First, the industry body has recommended moving to a demand-driven approach for identifying PSEs for privatisation. Currently, the government selects enterprises for sale and subsequently seeks investor interest, a process that often stalls when demand or valuations fall short. CII has suggested reversing this sequence by first assessing investor appetite across a wider pool of enterprises and then prioritising those that attract stronger interest and appropriate valuations. Such a shift, it said, would enable smoother execution, better price discovery and help identify procedural or regulatory bottlenecks through structured investor feedback.

Second, CII has proposed that the government announce a rolling three-year privatisation pipeline, providing visibility on the enterprises likely to be taken up during this period. Greater clarity and longer planning horizons, it said, would deepen investor engagement, support more realistic valuations and accelerate the overall process.

Third, CII has called for a robust institutional framework to improve oversight, accountability and investor confidence. It recommended setting up a dedicated mechanism comprising a Ministerial Board for strategic direction, an Advisory Board of industry and legal experts for independent benchmarking, and a professional management team to handle execution, due diligence, market engagement and regulatory coordination. This structure could also track market developments, stakeholder feedback and post-privatisation outcomes to enable continuous improvement.

Fourth, acknowledging that complete privatisation of all non-strategic PSEs is complex and time-intensive, CII has suggested a calibrated disinvestment approach backed by a three-year roadmap as an interim step. Under this approach, the government could gradually reduce its stake in listed PSEs to 51 per cent, allowing it to remain the single largest shareholder while unlocking significant market value. Over time, the stake could be further reduced to between 33 per cent and 26 per cent.

According to CII’s analysis, lowering the government’s stake to 51 per cent in 78 listed PSEs could unlock close to Rs 10 lakh crore. In the first two years, the disinvestment strategy could focus on 55 PSEs where government holding is 75 per cent or less, mobilising around Rs 4.6 lakh crore. In the next phase, 23 PSEs with government stakes exceeding 75 per cent could be disinvested, potentially generating Rs 5.4 lakh crore.

“A calibrated reduction of the government’s stake in listed PSEs to 51 per cent and even lower is a pragmatic step that balances strategic control with value creation. Unlocking nearly Rs 10 lakh crore of productive capital would provide vital resources to accelerate physical and social infrastructure development and support fiscal consolidation,” Banerjee said.

CII said these measures would enhance investor confidence, ensure predictability and transparency, and maximise value realisation for the government. By concentrating on governance, regulation and enabling infrastructure—while allowing competitive markets to drive efficiency—strategic privatisation can free up public resources for priority areas such as health, education and green infrastructure, while maintaining a minimal presence in strategic sectors and supporting a self-reliant, globally competitive economy.

As per convention, the Union Budget for 2026-27 will be presented on February 1.