Will Economic Uncertainty Make It Difficult To Find Investors For Assets Under Monetisation Pipeline?  

The global economy post Covid-19 is already grappling with its own fare share of challenges. The growth rates of many nations have been declining, and as per analysts many nations are looking at the possibility of slipping into economic downturn and recession. In fact, according to the World Bank, an anticipated slowdown in China will push the growth levels to the lowest level in the century. The sense of uncertainty and possibility of economic slowdown has left investors in lurch- or it would be right to say that it has impacted investor’s sentiment badly. In the backdrop of badly impacted investor sentiment, meeting target of governments’ ambitious asset monetization plan looks quite daunting.  

“More than the economic slowdown, we believe that the prevalent market sentiment and upcoming general elections does not set the stage correctly for achieving the desired progress in asset monetization,” Manish Chawdhry, Head of Research Stoxbox told Outlook. According to Niti Aayog document on asset monetization, the National Monetisation Pipeline (NMP) aims at an aggregate monetisation potential of Rs 6 trillion through core assets of the Union government, over a four-year period, from FY2022 to FY2025.  The top five sectors, by estimated value, which captured nearly 83 percent of the aggregate pipeline value are roads (27 percent) followed by railways (25 percent), power (15 percent), oil & gas pipelines (8 percent) and telecom (6 percent). 

Similarly, Manuck Wadhwa of SKI Capital believes that the government's ambitious plans to monetise public assets, such as roads, railways, and power infrastructure, may face challenges due to the ongoing economic challenges. “The slowdown can adversely affected investor sentiment, which can potentially make it difficult for the government to attract the required capital to achieve the monetisation targets,” Wadhwa added. 

The government has set an ambitious target of whooping Rs 1, 79,544 crore for FY24. The target for the fiscal ending on March 31, 2023 stood at Rs 1,62,422 crore. However, the modest target of Rs 880 billion for FY22 was achieved easily. According to a source, the government is on the verge of missing out on FY23 target by Rs 50,000 crore. So investors and experts believe that economic downturn and dampened investor sentiment will only exacerbate the situation going forward.   

According to a recent report by PHDCCI, the growth projections for 2023 indicate that overall economic recovery is still fragile as 94 economies will face lower growth rates of their pre pandemic level. The report highlighted that 28 economies in the world have still not recovered. 

However, Saket Dalmia, President of PHD Chamber of Commerce has high hoped on Indian economic growth. “As such, there is no slowdown in Indian economy as the economy is projected to grow at around 7 per cent in 2022-23 and 6 per cent-6.8 per cent in 2023-24 which is fastest among the large economies. In the backdrop of such a bright picture of Indian economy, the asset monetisation will not be impacted in a big way. We look forward to the higher economic growth in the coming times as and when the global uncertainties are settled,” Dalmia added. 

Even when the global economic factors are making things look bit messier, Arindam Guha, Partner, Leader - Government & Public Services, Deloitte India has firm faith in investing capacity of private players, “There should be considerable interest from private investors in monetising assets in sectors like roads, railway freight corridors, and power transmission. However, underlying viability of assets and having supportive tax & regulatory structures would be important for transactions going through," Guha said.