causes are also important.
The strong post-financial-crisis stimulus led to stronger growth in 2009-10 and 2010-11. However, the boost to consumption, coupled with supply side constraints, led to higher inflation. Monetary policy was tightened even as external headwinds to growth increased.
The consequent slowdown, especially in 2012-13, has been across the board, with no sector of the economy unaffected.
Falling savings without a commensurate fall in aggregate investment have led to a widening current account deficit.
Wholesale price indexed inflation (WPI) has been coming down in recent month. However, food inflation, after a brief slowdown, continues to be higher than overall inflation. Given the higher weightage to food in consumer price indices, CPI inflation has remained close to double digits.
Another consequence of slowdown has been lower than targeted tax and non-tax revenues. With the subsidies bill, particularly that of petroleum products, increasing, the danger that fiscal targets would be breached substantially became very real in the current year, the Survey said.
"The situation warranted urgent steps to reduce government spending so as to contain inflation. Also required were steps to facilitate corporate and infrastructure investment so as to ease supply.
"Several measures announced in recent months are aimed at restoring the fiscal health of the government and shrinking the CAD as also improving the growth rate. With the global economy also likely to recover somewhat in 2013, these measures should help in improving the Indian economy's outlook for 2013-14," it said.
The economy is projected to grow at 5 per cent in current fiscal, the lowest in a decade. It was 6.2 per cent in 2011-12 and 9.3 per cent a year ago.
The projections of 6.1 to 6.7 per cent growth next fiscal takes into account normal monsoon, moderation in inflation rate and mild recovery in global growth.
"While India's recent slowdown is partly rooted in external causes, domestic causes are also important," it said, adding boost to consumption coupled with supply side constraints led to higher inflation.
It said the growth story is unlikely to get support from the global economic developments and would remain tied to movement in international oil prices.
Chief Economic Advisor Raghuram G Rajan