NEW DELHI, Feb 28: Indian markets went into a sulk and the rupee took a sharp 50 paisa fall against the dollar on Thursday as Finance Minister P. Chidambaram unveiled a surge in spending in his last budget before next year’s general election.

Analysts expressed scepticism at Mr Chidambaram’s ambitious revenue assumptions and seemed dismayed by the increase in public spending in a country facing its sharpest economic downturn in a decade, which is hovering at around 5 per cent of the GDP.

Total budget expenditure will rise by 16pc in the 2013-14 fiscal year to Rs16.65 trillion. Stocks, bond prices and the rupee all fell despite the finance minister’s promise to cut the fiscal deficit to 4.8pc of the GDP in the year starting April 1.

Mr Chidambaram increased the defence budget unusually modestly, saying that New Delhi plans to spend up to Rs2.03tr ($37.7 billion) on defence next year, up from a revised Rs1.78tr this year.

He said Rs867.4bn would be spent to buy defence equipment, up from this year’s about Rs695.7bn. The government had originally planned to spend Rs795.7bn on purchasing defence equipment this year.

The entire allocation may be difficult to spend as major defence orders are expected to be delayed due to greater scrutiny following a clutch of financial and bribery scandals, including in the purchase of military equipment.

“The minister of defence has been most understanding and I assure him and the house that constraints will not come in the way of providing any additional requirement for the security of the nation,” Mr Chidambaram said in his speech, referring to a recent government decision to trim the current fiscal year’s defence budget to Rs1.78tr from the original allocation of Rs1.93tr.