India needs $93 billion to fund budget; financial markets tank

India plans to borrow $93 billion to fund its budget spending to aid the poor and finance road and power infrastructure.

India’s finance minister Pranab Mukherjee unveiled the federal budget for the year 2009/10 ending March 2010 on Monday. The minister said the country’s fiscal deficit may widen to a 16-year high of 6.8 percent of gross domestic product from a revised 6 percent.

Bonds, shares and currency fell as investors were disappointed without major asset sales announcements and concerns a ballooning budget deficit may lead to a credit-rating cut.

Indian shares fell about 6 percent the maximum intraday fall on a budget day after 2001, as the much-hyped budget failed to live up to expectations.

Bloomberg News writes Mukherjee, 73, provided for only 11.2 billion rupees this year from the sale of stakes in state-run companies. Advisors to the finance minister, in a report on July 2, estimated the government could raise as much as 250 billion rupees annually over the next five years from asset sales.

India’s credit rating has worsened in the last few months with agencies Standard & Poor’s and Fitch Ratings placing it at their lowest possible investment grade, while Moody’s have placed the country two levels below investment grade.

None of the agencies have taken an immediate call on credit rating as of now.
Economist Prime Minister Manmohan Singh, however, lauded the budget and ensured the plans aim to bring India back in the 9 percent growth track on a sustained basis.

India GDP growth fell to 6.7 percent in 2008/09 fiscal year ending March 31, down from a three-year-average at near 9 percent.

India inflation slows to a year low on oil price cut

India's wholesale price inflation , fell to a one-year low primarily on the federal government's move to cut fuel prices.
Wholesale prices climbed 4.39 percent in the last week of January from a year earlier after gaining 5.07 percent the previous week, according to government data. Economists expected an increase in the range of 4.4 and 4.5 percent.
India's central bank had intermittently slashed interest rates in the past few months to strengthen and insulate the country's economy against the world's worst financial crisis, since the great depression in the 1930s.
The repurchase rate, which has been cut four times since October, is at 5.5 percent and the reverse repurchase rate is 4 percent.
The $1.2 trillion Indian economy is likely to expand 7.1 percent in the 12 months to March 31, the government said this week.
Prices of crude oil , India's major import, have slided 60 percent in the past oone year as fuel demand global recession has dampened demand. Crude has declined from a record $147.27 a barrel on July 11, 2008.