Asset sales target lacks credibility

The government’s hopes of hitting the record asset sales target in the budget for FY20/21 hinge on the smooth sale of large stakes in one of India’s worst-performing banks and a politically-important insurer. Neither is likely. The government may choose to deploy some creative accounting as it has in the recent past to paper over the resulting gap in its finances, or it will miss the target. Either way, the resulting deterioration in the underlying fiscal position is likely to put upward pressure on bond yields.