The government’s fiscal deficit, at 10.2% of GDP, is the third-biggest in the world behind the United States and Japan.
It is the biggest since 2004.
In fact, its deficit has risen to a record high of 12.9% in December.
Its budget deficit has grown to $7.7 billion, the highest since August.
The government is facing a crisis of confidence and it is being forced to cut expenditure and cut the size of government, as the budget deficit grows.
It has been trying to bring down the government’s deficit to 2% of the GDP, a goal that is unrealistic, said Ananth Kumar, senior economist at consultancy DBS.
“The government’s growth rate has been very slow and has been affected by weak foreign exchange and the impact of demonetisation,” said Kumar, who is also a former RBI governor.
The slowdown is having an adverse impact on the financial sector.
As the economy slows, foreign capital flows to India, and the foreign exchange market weakens, banks are struggling to absorb the losses and will be forced to seek higher interest rates from lenders, he said.
The Indian economy, which accounts for nearly 40% of global GDP, will continue to grow by 2.5% this year and 2.8% in 2019.
However, the government expects the economy to contract by 0.4% in 2020 and 1.2%.
For India, the current account deficit is an important gauge of its economy’s strength.
The budget deficit is the difference between what the government spends and what it takes in, as a share of the economy.
The government must raise its fiscal deficit to 3.5%, the third highest in the OECD.
In the current budget, the deficit is forecast to rise to 10.5%.
The current account surplus is expected to rise from $1.7 trillion in 2020 to $2.9 trillion in 2021.