MUMBAI - 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 as Finance Minister Pranab Mukherjee was speaking.
The benchmark 30-share Sensex fell 5.13 per cent or 765.25 points to a day's low of 14,147.8, before recovering marginally to 14,336.63, still off by 576.42 points or 3.87 per cent.
India's fiscal deficit ballooned to 6.2 per cent of gross domestic product for the financial year to March 2009 - more than double the government's target of 2.5 per cent and the highest in nearly two decades. The fiscal deficit is forecast to rise further to 6.8 per cent for the current financial year.
'The fiscal deficit number (forecast) is big and worrisome,' said Mr 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 per cent in the year ended March 31 - the slowest rate since 2003 and down from nine per cent a year earlier, as the effects of the global economic downturn hit home.
'The finance minister has failed to instill confidence of the markets, to contain the higher fiscal deficit,' said Mr Rupa Rege Nitsure, economist with Bank of Baroda.
India's total budget expenditure is set to cross 10 trillion rupees (S$303.38 billion) for the financial year to March 2010 - its highest since independence from Britain in 1947, Mr Mukherjee told parliament in a speech.
Mr Nitsure added: 'India will face a debt burden, which does not augur well for the future and could put pressure on interest rates and the exchange rate.' India's stock markets were boosted after the Congress-led government was returned to power with a stronger mandate in general elections in May.
The Sensex soared nearly 30 per cent to a recent high of 15,600 points in June, expecting a huge boost to reforms.
Historically, in the 18 years since liberalisation of India's economy, the stock markets have fallen 14 out of 18 times after the annual budget was announced. -- AFP
