India failed to make use of Rs954.9 billion ($19.7bn or Dh72.35bn) of loans sanctioned by overseas institutions including the World Bank and Asian Development Bank (ADB) as on March 31, 2009, said Finance Minister Pranab Mukherjee.
The unused "loan amount for the World Bank and ADB is Rs572bn against the sanctioned loan amount of Rs1.19 trillion," said Mukherjee in a written reply to a question in parliament in New Delhi yesterday.
"All funds cannot be used at one go," said Namo Narain Meena, Minister of State for Finance Minister, in parliament yesterday.
India paid a commitment charge of Rs1.13bn in the financial year ended March 31, 2009, for not using the amount, said Mukherjee.
India couldn't use the sanctioned funds due to a delay in projects, said the statement.
"During implementation, the projects are monitored through joint review meetings periodically," Mukherjee said. "State level portfolio reviews and site visits are also undertaken from time to time."
Mukherjee yesterday sought to convince investors that budget announced on Monday will help turn around the economy after stocks plunged the most in six months.
The budget "will lead to faster economic growth, but it wasn't packaged and sold well," said Vikram Kotak, who helps manage the equivalent of $2.4bn in Indian stocks and bonds at Birla Sun Life Insurance Co in Mumbai. "His intentions in the budget were good. He now needs to convey them."
Macquarie Group raised its April 2010 target for the stock index by 20 per cent saying markets "overreacted" yesterday. It expects the index at 18,000 by April.
The benchmark five-year bond yield climbed seven basis points to 6.51 per cent, extending yesterday's 22 basis-point advance yesterday after the government announced a bigger-than-expected budget deficit.
Investor expectations for the budget were high after Prime Minister Manmohan Singh won a resounding re-election in May, reducing his dependence on allies such as the communist parties who opposed asset sales and looser foreign investment policies during his first term.
Morgan Stanley, for example, expected Mukherjee to announce a target of between $4bn and $5bn from selling shares in state-run companies this year. Mukherjee provided for only Rs11.2bn in the budget.
Some analysts said the budget is about streamlining tax structures and allocating resources.
"The budget is a fiscal document and we think the short- term policy objective of stimulating demand will likely be achieved," said Tushar Poddar, a Mumbai-based economist at Goldman Sachs Group.
Mukherjee lowered the income-tax burden on companies and individuals by scrapping the fringe-benefit tax and the 10 per cent surcharge on personal-income tax respectively. He also announced spending of Rs1.79trn on roads, telecommunication and power, where capacity constraints are estimated by the finance ministry to shave two per centage points off the nation's annual economic growth.
Mukherjee said the government will provide rice and wheat at a subsidised rate of Rs3 a kilogramme to the rural poor.
Higher spending will see the budget deficit widen to 6.8 per cent of GDP in the year ending March 31, from 6 per cent, forcing the government to borrow a record Rs4.51trn. Mukherjee said he plans to overhaul subsidies.
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