Mr Singh, the finance minister, earlier this month forecast a marked fall in the deficit for the current fiscal year.
ECONOMIST: Too little investment; too big a deficit; too few jobs
Because of the timing of the expenditure, most of the money will increase the budget deficit for the current fiscal year.
In another key announcement, Mr. Chidambaram said also that the fiscal deficit for the current fiscal year ending March 31 could turn out to be lower than the earlier estimate of 5.2% of gross domestic product.
"The high current account deficit limits room for further easing, and the slowdown in growth is structural and due to supply-side issues, and should be addressed through reforms by the government, " said Leif Eskesen, chief economist for India and Asean at HSBC.
The current-account deficit, now around 5% of GDP, is a key factor: if capital flows into America slowed even more sharply, or dried up, the adjustment involved in reducing the current-account deficit could be painful both for America and the rest of the world.
For a start the current-account deficit is likely to overshoot projections of about 3% of GDP for 2011, if October's trade figures are anything to go by.
The U.S. has had a trade and current account deficit for many years, so the matching of jobs created and lost through international trade may not have resulted in a perfect match because of export and import equality.
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As such, recent trends in trade flows and the balance of payments suggest that the current account deficit for this fiscal year will likely reach a record of about 5% of GDP before narrowing closer to 4% next year.
In 2010, the Social Security system ran its first current account deficit since 1983, and for the first time since the reforms the deficit was covered by redeeming Trust Fund bonds.
The primary cause for this difference in debt-holding is that the US has been running a current account deficit for years, while Japan has historically always exported more than it imports.
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Some acquisitions may lead to a loss of jobs, but on the whole they make companies more productive, create higher-wage jobs and help pay for the current-account deficit.
The central target was to eliminate the current structural deficit - that's the borrowing which is not for investment and not expected to go away naturally - with economic growth.
The reason for the action was to reduce the U.S. current account deficit, which had reached 3.5 percent of the GDP, and to help the U.S. economy to emerge from a serious recession that began in the early 1980s.
The bail-out plan makes unprecedented demands for fiscal adjustment to trim both the current-account deficit and inflation.
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This will move the region from a current-account deficit to a surplus, causing the demand for dollars to subside.
The Institute for Fiscal Studies, for example, reckons the OBR will put the structural current deficit this year at 4.9% - even under its most optimistic scenario, where Robert Chote and his colleagues consider the loss of growth this year to be temporary.
Conservative peer Lord Blackwell, who was a political adviser to former Prime Minister John Major, said that "the primary reason for our current deficit" was a growth in public spending from 40% of GDP to closer to 50% over the last decade.
If investors twig that European companies aren't such bad investments after all, he says, it will not be so easy for America to finance its current-account deficit with European savings and that points only one way for the dollar.
The puzzle is compounded by the fact that the world ran a persistent current-account deficit for at least three decades until 2005.
The report does have one other piece of bad news for the UK: it thinks our current account deficit is going to get even bigger.
The Indian government is keen to discourage gold purchases as imports of the precious metal is one of the main reasons for a widening current account deficit.
Things to watch out for are how will the country manage its current deficit especially as it looks to build its economy, and more importantly, how will it manage the oil and ensure it sufficiently enters the economy and is not siphoned off like in other countries.
Rate cuts could potentially widen the current account deficit by encouraging consumption and boosting demand for imported goods.
Analysts give diverse reasons for the meltdown, most pointing to the current account deficit fueled by numerous infrastructure mega-projects that rely on external financing in U.S. dollars.
Rate cuts could potentially widen the current-account deficit by encouraging consumption and boosting demand for imported goods.
However, it lowered its growth outlook for this year and next and said the current-account deficit will continue.
Both political parties are using the debate over caps as yet another proxy for a fundamental philosophical disagreement: Is the current fiscal challenge an excessive deficit or a bloated government?
Even more worrying, in the short term, is that alarming statistic I flagged up last week: the Office for Budget Responsibility expects us to run a current account deficit of 4% of GDP in 2012.
For one thing, the distortions, such as a burgeoning current-account deficit, that Greece allowed to build up in the good times far exceeded Argentina's.
Mr. Najib laid out ambitious plans for his next administration, such as reducing the fiscal deficit to 3% of GDP from the current 4.5%.
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