India’s State-Owned Enterprises
IMF Working Papers, August 26, 2022
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Bibliographic details
- Authors: Ruchir Agarwal, Elif C Arbatli Saxegaard, Lesley Fisher, Xuehui Han
- Published: August 26, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400219573.001
Overview
- India’s recently announced privatization strategy can facilitate a change in the composition of the public sector balance sheet toward high-return public sector investments in infrastructure and human capital where there is a clear role for government, leaving commercially viable companies for the private sector.
- The paper provides a description of the SOE sector in India, considers different criteria which can inform the scope and rationale for privatization, highlights takeaways from international experience with privatization, stresses the importance of improved governance and oversight of SOEs, and showcases analytical tools that can help analyze risks from SOEs.
- While focused on India, the framework for SOEs developed in this paper can be used to evaluate SOE policy options in other countries.
Key findings
- Privatization can recompose the public sector balance sheet toward high-return public investments in infrastructure and human capital.
- Commercially viable companies can be transferred to the private sector, allowing public resources to concentrate where government has a clear role.
- Improved governance and oversight of SOEs is essential to manage fiscal and contingent liabilities and to enhance SOE performance.
- Analytical tools are available and useful for analyzing risks arising from SOEs.
Policy recommendations
- Prioritize privatization where commercial viability exists to free up public resources for infrastructure and human capital investments.
- Apply clear criteria to inform the scope and rationale for privatization decisions.
- Strengthen governance and oversight frameworks for remaining SOEs to mitigate fiscal risks and improve efficiency.
- Use available analytical tools to identify and quantify risks from SOEs to the public sector balance sheet.
International experience and lessons
- The paper highlights takeaways from international experience with privatization that can inform India’s strategy.
- Lessons emphasize the role of governance, oversight, and analytical assessment in achieving successful privatization outcomes and managing residual SOEs.
Analytical tools and fiscal risk analysis
- The paper showcases analytical tools that can help analyze risks from SOEs, supporting policymakers in assessing contingent liabilities and the fiscal implications of SOE operations and restructuring.
Source: India’s State-Owned Enterprises, IMF Working Papers, August 26, 2022.
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