Mumbai: Indian stocks tumbled by more than 1% for the second straight day on Thursday, driven by concerns about a global growth slowdown, amid news reports that the government is planning a massive farm relief package that may further worsen the fiscal health of the nation. The BSE’s Sensex fell 377.81 points, or 1.05%, to 35,513.71, while the Nifty shed 1.11% to 10,672.25.

“Global growth concerns, combined with not-so encouraging domestic data, pushed the markets lower," said Jayant Manglik, president of Religare Broking Ltd.

Global growth is facing headwinds with the European Union slowing and the impact of late cycle fiscal stimulus in the US beginning to wane. Apple Inc. on Wednesday cut its revenue forecast, citing an economic slowdown in China and the US-China trade war, even as economies from East Asia to Germany are feeling the impact of trade skirmishes.

Apple forecast $84 billion in revenue for its fiscal first quarter ended 29 December, which is below analysts’ estimate of $91.5 billion, according to IBES data from Refinitiv. Apple originally forecast revenue between $89 billion and $93 billion, Reuters reported.

“Quantitative tightening and rising US interest rates imply that global growth could come under further duress. Moreover, slowing global growth also impacts commodity-exporting emerging markets," said Nirmal Bang Institutional Equities in a 2 January note.

Domestically, investors are concerned about the government’s ability to meet its fiscal deficit target as GST collections have been lower than estimated.

Although the government has hinted that it might miss the budgeted GST collection targets, finance minister Arun Jaitley has expressed confidence in meeting the fiscal deficit of 3.3% of GDP. The government has set a 1 trillion monthly target for GST collection and in the current fiscal, barring September, the collections have been less than the budgeted target every month.

Hemang Jani, head of advisory at Sharekhan by BNP Paribas, said: “With general elections around the corner, one can expect the volatility in the Indian markets to continue. The auto sector remained in the limelight, as growth for December 2018 remained sluggish. This was the second consecutive month of subdued performance by the industry. Weak consumer sentiment due to mandatory insurance costs and increased lending rates continued to impact demand."

Business Today magazine reported on Wednesday that the government was likely to announce direct transfers worth 4,000 an acre per season to farmers to help ease rural distress. It would also provide interest-free crop loans of up to 1 lakh a farmer, the report added. A Reuters report last week put the cost of such a farm relief package at as much as 3 trillion.

Earlier, Bloomberg reported that the government was weighing options including a monthly income support programme for farmers, a cash handout plan for the shortfall between the actual sale price and state-set procurement rate and a revamped crop insurance programme.

The government has already exceeded its budgeted annual deficit in October and any such announcement like a farm loan waiver or tax cuts may lead to fiscal slippage, say analysts. Fiscal deficit—the gap between the government’s revenue and expenditure—stood at 6.48 trillion at the end of October. That’s 104% of the budgeted estimate of 6.24 trillion for 2018-19. The gap stood at 96.1% in October 2017.

Recently, newly elected governments of Rajasthan, Madhya Pradesh and Chhattisgarh announced farm loan waivers aggregating around 62,000 crore.

Since April 2017, state governments have announced farm loan waivers amounting to 2.2 trillion.

Bloomberg and Reuters contributed to this story.

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