Now,Nomura warns India over growth

“Our analysis suggests that 45 per cent of the decline in potential growth is attributable to weaker investments, another 40 per cent to weaker total factor productivity and 15 per cent to weaker employment growth. Falling investments have

led to lower productivity,in our view,” Nomura India chief economist Sonal Varma said in a research note.

GDP growth dipped from a high 8.4 per cent in FY11 to an estimated 6.9 per cent in FY12 and possibly even lower in the current fiscal,Nomura said.

The report pointed out that the country’s economic fundamentals have weakened over the last four years,leaving the country with slowing growth,sticky inflation and large fiscal and current account deficits.

“The government and governance deficits are the root causes,in our view,while rising oil prices and weak global growth have not helped. It is now make-or-break time for the government,” it said.

The potential GDP growth depends crucially on the outlook for investment growth,she said,adding that in the past four years to FY12,average real investment growth has been lacklustre,averaging at 6 per cent per annum.

“If the investment continues at this rate,then the potential growth can slip below 7 per cent. To sustain an average annual growth of 7.5 per cent,real investment growth needs to rebound to 10 per cent.