23 If the Indian government reduces its deficit and returns to a balanced budget, how will the demand or supply of loanable funds in India change? India’s Economy Hits the Wall At the start of 2008, India had an annual growth of 9 per cent, huge consumer demand, and increasing foreign investment. But by July 2008, India had 11.4 per cent a year inflation, large government deficits, and rising interest rates. Economic growth is expected to fall to 7 per cent a year by the end of 2008.

A Goldman Sachs report suggests that India needs to lower the government’s deficit, raise educational achievement, control inflation and liberalise its financial markets