July 6, 2009

India budget seeks 9 percent growth

India's finance minister in his fiscal 2009 budget Monday called for a speedy return to 9 percent growth but investors sold off amid concerns about deficits.

In presenting the 2009-10 budget to parliament, Pranab Mukherjee said the first challenge is to lead the economy back to 9 percent growth at the earliest.

The budget, the first since the Congress-led coalition of Prime Minister Manmohan Singh was returned to power in May, was more focused on rural development, critical for growth.

Although India's economy grew by 6.7 percent in the year ended this March despite the global decline, the Economic Times reported it was the lowest since 2003 and down from 9 percent a year earlier.

The report quoted Mukherjee as saying the need to return to a higher growth must be balanced against the need for financial austerity.

The stock markets, however, were rattled by the deficit forecast in the budget of 6.8 percent of GDP for the year ending March 2010, compared to 6.2 percent in the year ended March 2009, which resulted from the government's stimulus package to fight the global downturn.

The main 30-stock Sensex index on the Mumbai stock exchange nosedived about 870 points to close at 14,043 points. The broader Nifty index also fell 259 points to 4,166 points.

The investors largely ignored the budget's decision to abolish the fringe benefit tax, seen as handicapping business, the Press Trust of India reported.

The budget raised the annual personal income tax exemption limit by 15,000 rupees or $309 to 240,000 rupees or $4,954 for senior citizens. For others, the limit was raised by 10,000 rupees or $206 to 160,000 rupees or $3,302.

No changes were made in corporate taxes.