India must reduce its fiscal deficit, which has led to rise in interest rate, choked private investments and prevented the financial sector to improve efficiency, the World Bank said. High deficit was also preventing the financial sector from improving its efficiency, World Bank country director Michael Carter said at an IRADE-IIEF conference here. "A sine qua non of improved financial sector efficiency is progressive reduction in fiscal deficits,' he said. High level of deficit and government borrowing "crowd out' private investments, he said.