Budget disappoints but more detail to come

By Tony Munroe and Surojit Gupta

NEW DELHI (Reuters) - India's newly re-elected government may have disappointed investors with a deficit-laden budget lacking big pro-market initiatives but it does not mean the government has abandoned intentions towards reforms.

Investors, many of whom had priced in unrealistic expectations from Monday's budget, need patience.

Government insiders and observers said more is to come.

"The thing this budget may be remembered by is 'delay'. A delay to deficit reduction, a delay to subsidy cuts and flexible fuel pricing," UBS economist Philip Wyatt wrote in a note.

Monday's budget release was heavy on spending for farmers and the poor, a core constituency of the Congress party-led ruling coalition, funded by a surge in borrowing and an increase in the fiscal deficit to 6.8 percent of GDP.

Investors who wanted restrictions loosened on foreign ownership, tighter fiscal management and an end to costly fuel subsidies were disappointed.

Finance Minister Pranab Mukherjee made few promises with his budget, Morgan Stanley economist Chetan Ahya wrote.

"Indeed, we believe he was careful to avoid making noise on politically sensitive issues such as divestments and FDI (foreign direct investment)," Ahya wrote.