Disinvestment as a Pathway to Fiscal Sustainability: Evaluating India’s Progress under the FRBM Act

DOI

10.2991/978-94-6239-795-8_5How to use a DOI?

Keywords

Disinvestment; FRBM Act; Fiscal Sustainability; Fiscal Deficit; Debt Management; Fiscal Policy

Abstract

India’s Fiscal Consolidation framework was established by Fiscal Responsibility and Budget Management (FRBM) Act, 2003. Throughout this framework disinvestment has been used as a tool for both revenue generation and a public sector reform. This paper analyses whether disinvestment has genuinely contributed to fiscal sustainability under the FRBM framework or if it has only been used as a temporary budgetary tool to meet deficit targets. Fiscal sustainability ensures that government deficits and debt remain under control over time without relying on one-time fixes. The FRBM Act established a rules-based framework with the goal of bringing the public debt and budget deficit down to sustainable levels in order to maintain fiscal discipline. This study evaluates the role of disinvestment in achieving fiscal sustainability in India under the FRBM framework. This paper uses time-series analysis to examine short-run and long run dynamics between disinvestment proceeds and fiscal deficit outcomes, and key macroeconomic variables over the period 1991 to 2025. The study shows that disinvestment has been used to meet annual deficit targets rather than improving public finances. The paper identifies main gaps and problems in the FRBM framework and it suggests that reforms are required in the fiscal rule framework to use disinvestment proceeds as a source of fiscal sustainability. Disinvestment should not be considered as a deficit target anymore. The study emphasises that disinvestment can help to reduce the deficit but it needs to be part of a bigger plan. The main focus should be on improved tax administration, stronger public enterprise governance and also needs to rationalize spending.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Susmita Kalyani
AU  - K. A. Aneesh
PY  - 2026
DA  - 2026/10/08
TI  - Disinvestment as a Pathway to Fiscal Sustainability: Evaluating India’s Progress under the FRBM Act
BT  - Proceedings of the International Conference on Advancing Economics (ICAE): Redefining Growth: Integrating Economy Society and Sustainability for a Resilient Future (ICAE 2026)
PB  - Atlantis Press
SP  - 52
EP  - 75
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-795-8_5
DO  - 10.2991/978-94-6239-795-8_5
ID  - Kalyani2026
ER  -