Vishleshan for Regulatory Exams: Check Daily News Analysis 25th June 2025 

To stay ahead in your RBI, SEBI, or NABARD exam preparation, it’s important to stay updated with important economic and regulatory developments. In today’s edition of Vishleshan, we break down two important topics: The proposed All-India income survey and falling PSU disinvestment receipts. Both topics are not only relevant from an exam perspective but also crucial for understanding India’s economic landscape. Read on to get well-informed on this new topic.

ALSO CHECK: News Analysis of 24th June 2025 

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The Proposed All-India Income Survey

Context: The statistics ministry’s plan for an all-India household income survey could plug a glaring gap in national data. If hurdles that stalled past efforts are overcome, it could serve as a valuable policy input and help address poverty.

Source: Mint

India is embarking on a crucial statistical endeavour: the National Statistics Office (NSO), under the Ministry of Statistics, plans to conduct its first-ever nationwide Household Income Survey (HIS). This initiative aims to fill a significant gap in India’s statistical coverage, as the country has historically struggled to successfully measure household income despite multiple past attempts. A reliable income survey is vital for evidence-based policymaking, particularly in understanding poverty levels and resource distribution.

The Need to Measure Household Income:

Measuring household income is fundamental for a comprehensive understanding of a nation’s economic well-being, inequality, and the effectiveness of its policies.

• Need to Measure Household Income:
  • Poverty Assessment: Income data directly indicates the financial capacity of households, providing a more precise measure of poverty levels compared to consumption expenditure. The article highlights that the “Centre has long had to use consumption expenses as a proxy to track a crucial variable: India’s level of poverty” due to the absence of reliable income data.
  • Inequality Analysis: It enables accurate assessment of income distribution, identifying disparities between different socio-economic groups and regions. This is crucial for designing targeted welfare programs and redistributive policies. The article states that “our official lenses lack clarity on how the country’s income pie is shared”.
  • Tax Policy: Reliable income data is essential for formulating progressive tax policies and improving tax compliance.
  • Welfare Program Design: Understanding income levels helps governments design effective social safety nets, subsidies, and transfer programs that reach the intended beneficiaries.
  • Economic Research and Forecasting: Income data is a critical input for economic modelling, forecasting, and understanding consumption and savings patterns.
  • Policy Evaluation: It allows for a robust evaluation of the impact of various government interventions on household well-being. The article states that if the NSO gets its HIS right, “policymaking could begin to lean directly on income data”.
• Current Mechanisms in India to Measure Income Levels:
  • Consumption Expenditure Surveys: Historically, India has primarily relied on Household Consumption Expenditure Surveys (HCES) conducted by the National Sample Survey Office (NSSO) (now NSO) as a proxy for economic well-being and poverty measurement. These surveys collect data on how much households spend on goods and services.
  • Past Attempts at Income Surveys:
    • In the 1950s, the statistics ministry tried to collect income data as part of its consumption expenditure survey.
    • About a decade later, it attempted to gather data on “receipts and disbursements as part of its Integrated Household Survey”.
    • Further efforts were made in the 1980s.
  • Reasons for Past Failures: A “reliable picture of what Indian homes earn eluded it” because “Official data on consumption and savings, into which income is split, was refusing to square with what respondents revealed.” “Under-reported income was a big reason such surveys were given up.”.
  • Limited Private Surveys: While “less well-funded organizations, like the National Council of Applied Economic Research, have been doing sample studies of income across strata for decades,” these are typically sample studies and not national-level comprehensive surveys.

Analysis of the Article: Decoding the Household Income Survey (HIS) Initiative

The article details the NSO’s ambitious plan for the Household Income Survey (HIS), acknowledging the inherent challenges and the critical need for its success.

1. The HIS Initiative and Its Significance:

• First-Ever HIS: The National Statistics Office (NSO) plans to carry out its “first ever Household Income Survey (HIS) across the country”.
• Filling a Statistical Gap: This initiative aims to address the “one big gap in India’s statistical coverage” – the absence of a national survey on household incomes.
• Improved Policymaking: The success of the HIS would be transformative, allowing policymaking to “lean directly on income data” rather than relying on consumption as a proxy for poverty levels.

2. Expert Guidance and Methodology Design:

• Expert Group: The government has appointed an expert group led by economist Surjit S. Bhalla to guide the HIS.
• Scope of Expert Group: This panel, comprising “data mavens with experience in tracking income levels,” is tasked with proposing concepts and definitions for the survey, as well as designing its methodology, including “sampling process and tools”.

3. Challenges in Measuring Household Income in India:

• Varying Notions of ‘Income’: Measuring income is a “challenge to sniff at” because “notions of ‘income’ vary” across different segments of the population.
• Informal Sector and Subsistence Farmers: Workers in the informal sector and subsistence farmers “could be clueless if asked to state their income”.
• Non-Salaried and Asset-Based Earnings: Even “salaried earners may fail to count their earnings off assets”. This highlights the complexity of capturing all income sources in a diverse economy.
• Under-reporting/Masking of Income: A significant hurdle is the “masking of income,” which is “presumably a function of tax evasion”. This issue was a “big reason such surveys were given up” in the past.
• Trust and Data Security: How “secure people feel about parting with their personal data would be key” to minimizing under-reporting. This is a “steeper task at the upper reaches of India’s pyramid”.
• Representative Sampling: For the survey findings to be credible, the sample must “statistically represent every home—from the poorest to the wealthiest”. Achieving this breadth of representation is a significant methodological challenge.

4. Potential Solutions and Way Forward:

• Refined Definitions and Clear Questionnaires: Globally accepted definitions of income can be “refined to suit” India’s diverse context. A questionnaire that “clearly conveys what exactly it’s asking” can minimize errors.
• Digital Technology: “Digital technology could help keep the quality of field inputs in check too”. This could enhance data collection accuracy and efficiency.
• Learning from Global Best Practices: India can take cues from resources like “The Canberra Group Handbook on Household Income Statistics”, which was authored by a task force of international experts.
• Improving Policymaking: A successful HIS will provide a “comprehensive grasp of how hard-up or well-off households across India are,” ultimately leading to improved policymaking in areas like poverty alleviation and resource distribution.

In conclusion, the NSO’s planned Household Income Survey is a much-needed initiative to provide crucial income data for effective policymaking in India. While historical attempts have faced challenges due to issues like under-reporting and definitional complexities, the current effort, backed by an expert group and leveraging digital technology, aims to overcome these hurdles. The success of the HIS will be pivotal in gaining a clearer understanding of India’s income distribution and addressing fundamental economic issues.

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Falling PSU Disinvestment Receipts

Context: Disinvestment as a policy was launched in the early 1990s to bolster revenue and use the reduced government stake in PSUs to help enhance their autonomy. In the last 10 years, only three PSUs have been privatised — Air India, Neelachal Ispat and Ferro Scrap Nigam.

Source: Business Standard

The Narendra Modi government’s approach to Public Sector Undertakings (PSUs) has undergone a notable strategic shift over the last decade. While initially signalling a faster pace of disinvestment and privatisation, the policy has evolved towards a more calibrated approach, heavily relying on PSUs as vehicles for the government’s ambitious capital expenditure (CapEx) plans, rather than primarily as sources of direct revenue from stake sales. This change is evident in the declining trend of disinvestment receipts contrasted with a significant increase in government equity and loans infused into PSUs.

Understand the Key Terms:

To understand the government’s shifting strategy, it’s crucial to define key terms:

• Disinvestment: Refers to the sale or liquidation of assets by the government, usually public sector enterprises (PSUs) or public sector undertakings (CPSEs in India). It involves the government selling its stake in state-owned companies.
• Disinvestment vs. Privatisation:
  • Disinvestment: Is a broader term. It can involve selling a minority stake (where the government retains management control) or a majority stake (which may or may not lead to transfer of management control).
  • Privatisation: Is a specific type of disinvestment where the government sells a controlling stake (usually 51% or more) in a PSU to a private entity, resulting in the transfer of management control to the private sector. The article explicitly states: “Strategic Disinvestment implies entire or substantial sale of Government shareholding of a CPSE along with transfer of management control.”
• Objectives of Disinvestment:
  • Bolster Revenue: Historically, a primary objective has been to raise non-tax revenue for the government, which can be used to fund social programs, infrastructure development, or reduce fiscal deficit. The policy was “launched in the early 1990s to bolster revenue”.
  • Enhance PSU Autonomy and Efficiency: To help “enhance their autonomy” by reducing government interference and promoting professional management. The shift also aims to improve “efficiency and growth” of CPSEs.
  • Unlock Value: To “unlock the true value of CPSE stocks” and promote “public ownership”.
  • Promote Public Ownership: To broaden ownership base of state-owned companies among citizens.
  • Meet SEBI Norms: To meet the “minimum public shareholding norms of SEBI”.
  • Ensure Higher Accountability: To infuse “transparency and accountability in their functioning”.
  • Reduce Government in “Business of Running Businesses”: The “central idea behind disinvestment was that the government should not be in the business of running businesses”.

Process of Disinvestment in India:

The disinvestment process in India involves a multi-layered decision-making mechanism to ensure transparency and optimal value realization.

• Key Department: The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal department for disinvestment in India.
• Mechanisms of Disinvestment:
  • Minority Stake Sale (without transfer of management control): Implemented through various SEBI-approved methods such as:
    • Initial Public Offer (IPO): Listing of unlisted CPSEs. Since 2014-15, 18 CPSEs (including LIC) have been listed, yielding ₹51,225 crore. These new listings achieved an “additional market capitalization of ₹7.31 lakh crore”.
    • Offer for Sale (OFS): Selling existing shares to the public in listed CPSEs. This yielded ₹1,34,771 crore since 2014-15.
    • Buyback of Shares: PSUs buy back their own shares. This generated ₹45,104 crore through 45 transactions since 2014-15.
    • Exchange Traded Funds (ETFs): Selling PSU shares through CPSE ETFs and Bharat 22 ETF. This realized ₹98,949 crore during the period.
    • These transactions are “carried out from time to time based on market conditions, investor’s interest and economic outlook”.
  • Strategic Disinvestment (with transfer of management control): Involves selling an entire or substantial government shareholding along with management control.
• Transparency and Accountability: The process emphasizes “Transparency and accountability” through a “multilayered decision-making mechanism following an open, transparent and competitive bidding process”.
  • Transaction Advisers (TAs): Appointed for each strategic disinvestment transaction to design and plan the transaction and advise on value optimization.
  • Merchant Bankers and Selling Brokers (MBSBs): Appointed for Minority Stake Sale.
  • Investor Road Shows: Conducted in India and/or abroad to understand bidder concerns and gauge investor interest.

Disinvestment Targets/Estimates and Actuals: FY2014-15 to FY2024-25

• Discontinuation of Separate Targets: The government has discontinued fixing separate disinvestment targets/estimates since the Revised Estimate (RE) of FY 2023-24.
• “Miscellaneous Capital Receipts” (MCR): Instead, an amount is now kept under “Miscellaneous Capital Receipts” (MCR), which includes estimated receipts from “management of equity investments and public assets through various mechanisms”.
• FY 2024-25: There was “no separate estimate/target for disinvestment receipts”. An amount of ₹50,000 crore was kept under MCR at Budget Estimate (BE) stage, which was revised to ₹33,000 crore at RE stage.
• FY 2025-26: The Budget Estimate for MCR has been kept at ₹47,000 crore.
• Actual Disinvestment Proceeds (FY 2014-15 to FY 2024-25):
  • Since 2014-15, a total of ₹4,37,442 crore has been realized as disinvestment proceeds (as on March 25, 2025).
  • This includes:
    • Minority stake sale: ₹3,30,049 crore.
    • Strategic disinvestment: ₹69,412 crore from 11 CPSEs (including Air India, NINL, and FSNL privatized). This figure excludes Enterprise Value received for NINL and FSNL as GoI didn’t have direct equity.
    • Other transactions: ₹37,981 crore.
  • Trend as % of GDP:
    • Disinvestment receipts rose from 0.2% of GDP in 2014-15 to a high of 0.6% of GDP in 2017-18.
    • However, it “fell steadily to just about 0.03% of GDP in 2024-25”.
    • The fall since 2017-18 was “sharper than the rise in the previous three years”.

Analysis of the Article: Decoding the Issue

The article critiques the Modi government’s evolving disinvestment policy, highlighting a significant shift from an initial promise of aggressive privatisation to a more calibrated approach that has increasingly used PSUs as vehicles for public capital expenditure rather than as major sources of revenue through stake sales.

1. Policy Shift: From Privatisation Push to Capital Infusion:

• Initial Hopes vs. Reality: The Modi government’s formation in 2014 “gave rise to hopes of a faster implementation of a disinvestment plan leading to privatisation” and saw a “good beginning” in early years. However, in retrospect, it “has proved to be a false start”.
• Limited Privatisation: In the last 10 years, “only three PSUs have been privatised — Air India, Neelachal Ispat and Ferro Scrap Nigam”. This is despite a decision in 2021 to privatize half a dozen PSUs, which saw “hardly any action”.
• Contradictory Actions: The government has even “begin infusing fresh equity into some of the PSUs like the Rashtriya Ispat Nigam, an enterprise it had earlier proposed to privatise”.
• Defence of Policy Shift: The government defends this policy shift by arguing that it “believes PSUs to be a source of value creation”.

2. Nuanced Financial Story of PSUs Under Modi Government:

• Declining Total Receipts from Disinvestment and Dividends: Contrary to the value creation argument, the government’s total receipts from disinvestment and dividends from PSUs (as a % of GDP) “fell from 0.45% in 2014-15 to 0.25% in 2024-25“. This is termed a “not-so-obvious trend.”
• Unprecedented Increase in Equity and Loans to PSUs: In contrast, the government has been “increasing its capital allocations for PSUs through equity and loans in the last 10 years, from about 0.54% of GDP in 2014-15 to about 1.66% of GDP in 2024-25“. This is described as an “unprecedented increase,” significantly higher than the pace under the previous UPA government.
• PSU Funding as a Driver of Government Capex: This large increase in funds to PSUs is “not unconnected with the massive increase in its capital expenditure plan over the last 10 years”.
  • Government capex rose from 1.6% of GDP in 2014-15 to 3.1% of GDP in 2024-25.
  • The government’s capex plan was ambitious because it “relied on its modified public sector strategy,” where “infusion of equity and loans to PSUs is counted as part of its total capex plan”.
  • The share of PSU equity and loans in total government capex rose from 34% in 2014-15 (₹0.67 trillion out of ₹1.96 trillion) to 54% in 2024-25 (₹5.48 trillion out of ₹10.2 trillion).

3. Conclusion on Policy Effectiveness:

• The government’s policy of treating PSUs as a “source of value creation” has yielded “very little additional revenue” over the last decade in terms of disinvestments and dividends (as % of GDP).
• Instead, the government has been “pumping in more resources into PSUs,” which has “helped it sustain a steady rise in its overall capex plan”.
• The article concludes that “sustaining its support to PSUs through higher equity and loans was a critical ingredient of its overall plan to boost capital expenditure to revive growth, particularly after the Covid pandemic”.
• This signifies a policy where using the public sector to revive the economy through higher capex has become as important as the shift away from disinvestment.

4. Future Outlook and Financial Adjustments:

• “Sustaining the government’s overall capex plan will continue to depend on strengthening the capital base of central PSUs”.
• The article hints at potential “limitations” to this route, suggesting the government may need to “explore new avenues for boosting its capex plan”.
• The article also includes a clarification on personal income-tax collections for 2024-25, which were 1.7% lower than revised estimates, and a ₹32,995.3 crore “negative” receipt from Integrated Goods and Services Tax (IGST) due to excess settlement with states.
• Despite these shortfalls, the Union government “decided not to adjust this amount from the states in March to enable them to invest in projects that would spur growth,” providing “much-needed fiscal space to states” without undermining the Union government’s fiscal performance.
• Savings were also achieved in revenue expenditure (e.g., from conditional Finance Commission grants, interest payments, centrally sponsored schemes, and non-utilization of MSME funds due to non-NPA loans).

The overall picture suggests a strategic recalibration where direct disinvestment revenues have taken a backseat to leveraging PSUs as instruments for driving large-scale public capital expenditure, which has been crucial for reviving economic growth. This approach comes with its own trade-offs and future limitations, necessitating continuous evaluation of fiscal strategies.

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