Finance Minister Nirmala Sitharaman, presenting the 2020/21 budget for the financial year beginning April 1 to parliament, said the fiscal deficit for the current year would widen to 3.8% of gross domestic product, up from 3.3% targeted for the current year.

For fiscal 2020/21 Sitharaman set the fiscal deficit at 3.5 percent as it boosts state funding to shore up a sagging economy that has put pressure on Prime Minister Narendra Modi, who is already facing a public backlash over a new citizenship law seen as socially divisive.`

To help generate revenue, she also announced the government will reduce stakes in the country's largest insurer Life Insurance Corporation as part of its divestment programme.

India is grappling with its worst economic slowdown in a decade. The government estimates economic growth this year, which ends on March 31, will slip to 5%, the weakest pace since the global financial crisis of 2008-09.

Sitharaman said 2.83 trillion Indian rupees ($39.82 billion) will be allocated for agriculture and allied activities including helping farmers set up solar power generation units as well as establish a national cold storage to transport perishables.

"Farm markets need to be liberalized, farming need to be made more competitive" she said.

She also said the government will spend $50.65 billion on a federal water scheme to address the challenges facing one of the world's most water stressed nations.

Agriculture accounts for 15% of India's gross domestic and a source of livelihood for more than half of the country’s 1.3 billion population.

Sitharaman said "water stress related issues are now a serious concern across the country," and that the government is proposing comprehensive measures for 100 such water stressed districts.

In its annual economic report, released on Friday, the government predicted that growth would rebound to 6.0% to 6.5% in the fiscal year beginning April 1, but warned that it may have to exceed its deficit target to revive growth.

"People have reposed faith in our economic policy," said Sitharaman to the thumping of desks in parliament. "This is a budget to boost their income and enhance their purchasing power."

Sitharaman also set aside 690 billion rupees for the health sector, up marginally from last year's allocation as the government seeks to implement an ambitious scheme to provide health insurance for millions of people.

Some economists said global trade tensions and the outbreak of coronavirus in China, which has killed more than 250 people so far, pose a new risk to economic recovery by hitting cross-border commerce and supply chains.

"The economic recovery is likely to be slow and shallow despite the recent measures to boost investments," said Anagha Deodhar, an economist at ICICI Securities.

Indian shares got off to a choppy start in a special trading session on Saturday ahead of the budget.

In early trade shares slipped in reaction to an overnight shakeout in global markets on growing concerns about the economic impact of the coronavirus outbreak in China.

By Manoj Kumar, Aftab Ahmed and Mayank Bhardwaj