New Delhi, Dec. 21 -- For two years, Indian policymakers have celebrated the country's position as the world's fastest-growing major economy. However, beneath the headline numbers, a quieter concern has taken hold among economists: India is suffering from one of its most worrying slowdowns in capital formation in more than a decade.

Investment no longer keeps pace with the economy's needs. Our ability to build new factories, expand infrastructure and adopt new technologies is weakening. And this has consequences not just for future growth, but also for jobs, productivity and the country's long-term development path.

A useful way to see what drives a country's productive capacity comes from Xavier Sala-i-Martin's framework. Capital grows...