Posted by: jhamon | July 6, 2009

Now India to Borrow

The North Block, in New Delhi, houses key gove...

The North Block

So much for decoupling.  Apparently, India is suffering from a lack of American consumption.  Its government has today announced a record budget gap and they will be borrowing, borrowing, borrowing.  Well at least we  have taught them something.  Why cut, cut, cut when you can print, print, print?

 July 6 (Bloomberg) — India’s Finance Minister Pranab Mukherjee announced plans to borrow a record 4.51 trillion rupees ($93 billion) to fund budget spending on roads, power and aid for the poor. Stocks, bonds and the currency slumped.

Unveiling the budget for the year to March 2010, Mukherjee said India’s fiscal deficit is expected to widen to a 16-year high of 6.8 percent of gross domestic product from a revised 6 percent. Indirect taxes will be streamlined through a goods and services tax, he said in his speech in New Delhi today.

The market, for its part, voted with its feet:

The Bombay Stock Exchange’s Sensitive Index fell the most in six months, declining 5.8 percent to 14,043.40 at the 3:30 p.m. close in Mumbai. The rupee weakened 1.3 percent, the most in almost six weeks, to 48.5375 against the dollar. The yield on the most-traded 6.07 percent note due May 2014 surged 22 basis points, the most since March 17, to 6.45 percent.

 

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