Efforts should be made to increase investments in country: Nomura

Financial services company, Nomura is of the opinion that unless efforts are made to increase investments in the country, the GDP growth could fall below the estimated 7%. It has urged the government to take urgent steps to improve the investment climate in the country and revive growth.

It has further stated (in its report) 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. Infact it has attributed 45% of the decline in potential growth to weaker investments, another 40% to weaker total factor productivity and 15% to weaker employment growth. The worsening global situation has only made matters worse.

Pointing out that GDP growth and its estimates depend on plans of future investment, Nomura has observed that average real investment growth in the country has been averaging at 6% per annum and if the trend continues, then the potential growth can slip below 7%. It is of the opinion that to sustain an average annual growth of 7.5%, real investment growth needs to rebound to 10%.

GDP growth has dipped from a high 8.4% in FY11 to an estimated 6.9% in FY12 and is expected to average around 7.3% in the current fiscal.