The Indian government is likely to set a conservative target for the funds it can raise through the disinvestment of state enterprises in fiscal 2024 after mop-up fell short this year, analysts said.

"We pencil in divestment receipts of 350 billion Indian rupees ($4.30 billion) in 2022/23...For 2023/24, we factor in divestments of 500 billion rupees," Kotak Institutional Equities said in a note.

The Indian government has set a 650 billion rupee divestment target for 2022/23.

The brokerage believes the government would look to raise money by divesting further stakes in Life Insurance Corporation, Shipping Corporation of India and exiting holdings of Specified Undertaking of UTI, an investment vehicle which holds shares of listed and unlisted entities previously held by the failed Unit Trust of India.

Kotak also pointed out that outright privatization before general elections will be difficult.

Nomura, too, expects a more conservative target of 500 billion rupees in disinvestment receipts next year.

"The process of disinvestment and privatisation continues to be delayed, consequently increasing the burden on fiscal accounts," said Morgan Stanley. It expects the government to budget for just 350 billion rupees in receipts from share sales in public enterprises this year.

The government has achieved or surpassed its disinvestment target only in eight of the 32 instances in the past, economists at the Bank of Baroda wrote in a note.

"Clarity on disinvestment is very important to give the market a clear signal," said the economists, who forecast a disinvestment target of 400-500 billion rupees this year.

Disinvestment receipts add to the state's non-tax revenue, and robust inflows from this category could help the government quickly narrow its budget gap. The government is expected to target a fiscal deficit of 5.8% of GDP for 2023/24, Reuters reported last week.

($1 = 81.3790 Indian rupees)

(Reporting by Ira Dugal; Editing by Dhanya Ann Thoppil)