India to sell 10% stake in aeronautics firm

India's cabinet approved plans Thursday to sell off 10 percent of state-owned Hindustan Aeronautics Limited, a part-privatisation to help raise funds and slash its ballooning fiscal deficit.

The government released a statement saying it had "approved divestment of 10 percent equity in Hindustan Aeronautics Limited (HAL) out of its holding of 100 percent through an Initial Public Offer (IPO) in the domestic market".

HAL, which is managed by the ministry of defence, ranks among the country's leading aerospace companies with an annual turnover of 131 billion rupees ($2.4 billion) in the 2010-11 financial year.

The partial sell-off is expected to aid the government in its plans to cut the national fiscal deficit to three percent of GDP by 2017, from 5.8 percent last year.

"The divestment is likely to happen in the next financial year," Finance Minister P. Chidambaram told reporters.

After growth slowed to a near three-year low, the government in September announced a slew of reforms in retail, aviation and broadcasting in a bid to boost the economy.

According to analysts the government will need to slash populist subsidies as well in order to bring down the deficit.

The Indian economy expanded at near double-digit rates between 2005 and 2011, but the International Monetary Fund forecasts just 4.9 per cent growth for the current fiscal year.

Standard & Poor's warned last month there was at least a one-in-three likelihood of a downgrade of India's sovereign credit rating within the next 24 months from investment grade to junk.

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