In some situations, such as high budget deficit etc, there is rise in government borrowing from the market.  

• Due to the excessive borrowing by the government from the market, there is little credit left for private sector to borrow.  

• As a result, interest rate rises, making borrowings by private sector costly and leading to decline in private investment. This is known as crowding out effect.  
• The private borrowing and subsequent private investment is discouraged. 

Source: The Hindu