Investors in India lose Rs one trillion on budget day

[Omar1984]

Investors lose Rs one trillion on budget day

16 Feb 2009

MUMBAI: Investors lost close to Rs one lakh crore today as the market gave a thumbs down to the interim Budget FY'2009-10, which failed to provide any sops for key sectors.

After two weeks of pre-budget rally, the benchmark index Sensex today nosedived over 300 points to 9,305.45 points, with metals and realty stocks witnessing huge sell-offs.

Combined market capitalisation of all listed companies plunged to Rs 29,79,509.44 crore at the end of trading today from Rs 30,71,114.61 crore on Friday last week, losing over Rs 91,000 crore.

Analysts believe that the market would continue on its downward spiral from here as the interim budget dashed investors' hopes, which triggered a major sell off on the two bourses.

"The markets have been disappointed as a section of the industry and market was expecting that there would be some kind of stimulus from the government in view of slowing down of the industrial growth (negative two per cent in December 08) and exports," brokerage firm Bonanza Portfolio Director Shiv Kumar Goel said.

Further, the 30-Sensex companies, which account for over 47 per cent of the total marketcap of all the companies, saw their combined market valuation falling by over Rs 48,400 crore in a single day.

The benchmark index Sensex settled down 329 points or 3.29 per cent at 9,305.45 on massive buying by funds.

The combined marketcap of the 30 bluechip stocks dropped to Rs 14.28 lakh crore from Rs 14.76 lakh crore last week. Among the Sensex companies, Jaiprakash Associates, Reliance Infrastructure, Reliance Industries and ICICI bank were the major losers with their stock prices falling between four and eight per cent.

Investors lose Rs one trillion on budget day- Market News-Stocks-Markets-The Economic Times

 

[BanglaBhoot]

Indian budget deficit raises concern

By James Lamont in New Delhi

Published: February 16 2009 07:32 | Last updated: February 16 2009 17:42

An interim budget delivered by the Indian government on Monday ahead of parliamentary elections sparked fears that the country may return to an era of big budget deficits as it tries to protect itself from the global financial crisis.

Pranab Mukherjee, the acting finance minister, said India had temporarily set aside its tight public spending targets, recognising that a high fiscal deficit was “inevitable” to weather the challenges posed by recession in big economies.

“Conditions in the year ahead are not likely to be normal and, therefore, the high fiscal deficit is inevitable,” Mr Mukherjee told parliament.

“We will return to the [tighter fiscal] targets once the economy is restored to its recent trend growth path.”

Extra spending by the government is expected to push the fiscal deficit to 6 per cent of gross domestic product this year. The targeted rate was 2.5 per cent. But economists said a consolidated fiscal deficit – taking into account spending by states – would lead to a deficit closer to 10 per cent.

“The fiscal deficit is pretty high. Are we going to see this money being put to good use? What impact is it going to have on the private sector?” asked Tushar Poddar, vice-president of Asia economics research at Goldman Sachs, the US banking group.

“If it’s a two-year jump in the deficit, it will not cause too much damage to the private sector and to the economy. But if the government overreaches itself for several years, it could cause a lot of pressure down the road.”

The government is forecasting that it can pull back the fiscal deficit to 5.5 per cent next year. Economists, however, are doubtful, saying that economic growth will have to be far stronger than projected to reach this target.

The government forecasts economic growth this year of 7.1 per cent. A tough year lies ahead, with many independent estimates seeing growth falling towards 5 per cent as a cyclical downturn and global recession take their toll on the Indian economy.

The benchmark Sensex index on the Bombay Stock Exchange sagged 3.5 per cent to 9,305 as investors in some sectors such as textiles, property and carmaking registered their disappointment.

Earlier, shares had risen on expectations of greater assistance.

The government resisted the temptation to offer vote-winning handouts, focusing on limited support for the rural economy and infrastructure to buoy domestic demand. It also boosted military spending in what Mr Mukherjee said was a “sharply deteriorated” security environment following the Mumbai terror attacks.

Elections are expected to be held in April. With political parties placing the economy high on the campaign agenda, many had expected the ruling United Progressive Alliance to turn to tax cuts, targeted spending to win votes or even a big-ticket fiscal stimulus item.

“There were no new policy measures, no tax measures. Instead, it was an account of past achievements,” said Rajiv Kumar, the director of the Delhi-based Indian Council of Research on International Economic Relations.

“The government lost an opportunity of laying down an agenda of reform in these embattled times.”

FT.com / Asia-Pacific - Indian budget deficit raises concern

 

[johnpeter]

As I read one article on Indian Budget, I would like to give you some basic information on Indiad budget.

According to that article, India's Budget - India's public finance system follows the British pattern. The Indian constitution establishes the supremacy of the bicameral Parliament--specifically the Lok Sabha (House of the People)--in financial matters. No central government taxes are levied and no government expenditure from public funds disbursed without an act of Parliament, which also scrutinizes and audits all government accounts to ensure that expenditures are legally authorized and properly spent. Proposals for taxation or expenditures, however, may be initiated only within the Council of Ministers--specifically by the minister of finance.

Each state government in India maintains its own budget, prepared by the state's minister of finance in consultation with appropriate officials of the central government. Primary control over state finances rests with the state legislature in the same manner as at the central government level.

Here I give you some basic information on Indian budget.