Expert views - Budget raises spending for 2013/14

MUMBAI (Reuters) - India must make tough spending choices, Finance Minister P. Chidambaram said on Thursday, even as he unveiled a bigger-than-expected outlay for the coming fiscal year in one of the most highly anticipated Indian budgets of recent years.

Total budget expenditure will hit 16.65 trillion rupees in the fiscal year that begins on April 1, Chidambaram said, despite expectations for cuts from current year levels, which are on track to hit 14.3 trillion rupees, or 96 percent of the budget target.

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COMMENTARY

NAGARAJ KULKARNI, SOUTH ASIA SENIOR RATES STRATEGIST, STANDARD CHARTERED

BANK, SINGAPORE

"The market borrowing numbers are higher than out estimates, and it is negative for the market. There will be upward pressure on yields. However, interest rate cuts by the Reserve Bank of India need not be related to market borrowing. They will focus on the quality of the fiscal consolidation."

SHAKTI SATAPATHY, FIXED INCOME STRATEGIST, AK CAPITAL, MUMBAI

"Total expenditure for FY14 is higher than revised estimate for the current fiscal year. Fiscal prudence would now be dependent on the quality checks on the non-plan expenditure side, especially the subsidy front."

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

"He has made allotments for infrastructure, construction of warehouses; so as long as the spending is on account of capital expenditure, one need not view it negatively."

MARKET REACTION

The 10-year yield was up 3 basis points at 7.82 percent from levels before the finance minister began his budget speech.

The mains stocks index was down 0.21 percent as of 0706 GMT on proposed increases in some corporate and individual taxes, after earlier gaining as much as 0.88 percent.

The rupee weakened against the U.S. dollar, trading at 53.99/54.00 from levels of around 53.70 before the budget.

BACKGROUND

- The budget comes against the backdrop of the slowest economic expansion in a decade, strong inflation pressures and high interest rates. Large fiscal and current account deficits have pushed India to the brink of sovereign ratings downgrade.

- Central bank officials have warned that curtailing capital investment on projects with strong multiplier effects like building roads and bridges would hurt growth. They also worry that maintaining populist spending on subsidies for food, fuel, fertiliser and cooking gas will push up prices.

(Reporting by India Treasury, Companies, Markets teams; Editing by Ranjit Gangadharan)