Indian budget deficit spooks markets

MUMBAI, July 6, 2009 (AFP) – India’s stock markets on Monday gave a thumbs-down to the government’s annual budget, spooked by a rising fiscal deficit and saying there was no clarity on boosting foreign investment. Economists said the lack of a clear plan for the sale of government stakes in state-run enterprises also disappointed, as the main index fell more than five percent while Finance Minister Pranab Mukherjee was speaking.

The benchmark 30-share Sensex closed down 5.83 percent or 869.65 points to 14,043.4, on concerns of higher government spending.

India’s fiscal deficit ballooned to 6.2 percent of gross domestic product for the financial year to March 2009 — more than double the government’s target of 2.5 percent and the highest in nearly two decades.

The figure is forecast to rise further to 6.8 percent for the current financial year.

“The fiscal deficit number (forecast) is big and worrisome,” said Siddhartha Sanyal, economist with Edelweiss Securities.

“There were no big-ticket infrastructure spending details and the roadmap for disinvestment was unclear,” he told AFP.

India’s economy grew by 6.7 percent in the year ended March 31 — the slowest rate since 2003 and down fr