States' debt woes to bloat India's budget gap: Oxford Economics

Farm loan waivers, slowing revenues will see them miss targets

Deteriorating state government finances pose a risk to India, which already boasts the second-largest budget deficit among major economies, Oxford Economics said in a note.

India has signaled a larger fiscal deficit for the federal government for the year to March 2018 and while it has forecast a lower gap for next year, with a national election due in early 2019 many expect that target to be breached. Compounding those concerns are higher state government deficits, lower-than-expected revenues from the newly introduced goods and services tax, and farm loan waivers.

"This could eventually raise concerns about debt sustainability, leading investors