PSU stake sale not right, says Moody's

“Raising funds by selling stakes in state-owned companies is not a sustainable strategy,” said the research arm of the agency Moody’s Economy.com.

It said with the government planning to sell stakes in state-owned companies “although raising funds from the stock market would jump-start projects without further pressure on the fiscal balance, it is not a sustainable strategy”  Moody's said.

 The agency said a rise in initial public offerings of PSU companies could crowd out private firms which will have “a highly damaging effect in the current business climate of tight borrowing conditions. The government should therefore exploit this strategy only in moderation.”

Moody’s while cautioning the government with regard to its disinvestment strategy also said that the policymakers have been exploring options that would support the stimulus projects but not compromise fiscal discipline and stake sale in public sector units is a part of that strategy.