With respect to Budget 2026 to be introduced, one of the increasingly focused terms is disinvestment the sale of government stakes in public sector undertakings (PSUs). The Union Budget is much more closely tied to tax proposals and government spending; however, disinvestment is a vital source of revenue in the form of cash flow and a source of income that can be used to support the government’s expenditure on infrastructure or development projects.
What is Disinvestment?
Disinvestment is a type of disposition through which the government sells shares in PSUs in part or in full. The immediate revenue that, by doing so, will be redirected to social programs, some infrastructure or paying down debts. Disinvestment has two broad forms:
- Disinvestment of Minority Stake: The Government sells some of its ownership, but retains management control.
- Strategic Sale: The government transfers majority ownership and often hands over management control to a private entity.
Tax revenues alone do not always suffice for governing government because there are large fiscal demands, especially in emerging countries. Disinvestment offers a path to raising money without raising taxes. It helps:
- Address the fiscal deficit the gap between government spending and income.
- Invest in capital-intensive projects without raising public debt.
- Introduce Private Sector Management Practices to Enhance Efficiency in PSUs.
Disinvestment in Union Budget
The Finance Ministry provides disinvestment targets in each year’s Budget. For example, it was the objective of the government in Budget 2025 to generate ₹65,000 crore with disinvestment, which would include both minority investments, and strategic sales. Estimates show that under budget 2026, the government could target ₹70,000–75,000 crore. Those proceeds are taken as non-tax revenue, alleviating the fiscal deficit.
The Debate About Disinvestment
Disinvestment offers the short run relief but is not the long run substitute for sustainable revenue generation. Critics warn that selling stakes too much in strategic sectors also erodes public control, and that the value of investments does not always reach fair market value. Supporters say clever disinvestment especially in underperforming PSUs can help draw investment, enhance efficiency and fortify government finances.
Looking Ahead
Around the period of Budget 2026 the market, investors and policymakers will pay close attention to which companies the government plans to privatize, what its revenue would look like and what this will mean for India’s fiscal health. Disinvestment remains a big lever in India’s economic strategy, managing the desire for revenue with the long horizon objective of government efficient and competitive public enterprises.
