Nomura has cut its GDP forecast for India to 5.8 percent from 6.7 percent for the fiscal year ending March. 2013, and to 6.6 percent in 2013/14 vs previous 6.9 percent.
Nomura said the country's monetary and fiscal policy is "in a deadlock", adding that government policies remain inflationary, reducing scope for the RBI to cut interest rates, and in turn worsening the fiscal deficit.
"The longer the economy stays in the current deadlock, the bigger the policy shock that will be required to get out," Nomura said in a report on Monday.
Nomura also raised WPI inflation forecast for 2012/13 to 7.6 percent from prior 7.1 percent due to higher food prices and rupee depreciation.
It revised its 2012/13 fiscal deficit forecast to 5.8 percent from prior 5.2 percent. Government has targeted 5.1 percent deficit.