"The 8 per cent growth... in large part was because of the stimulus many emerging markets gave in order to prevent the major negative spillover from advanced countries," Rupa Duttagupta, Deputy Chief of the World Economic Outlook Division of the IMF, told reporters at a news conference here.
The International Monetary Fund (IMF), in its latest World Economic Outlook, projected an average growth rate of about 3.8 percent in market prices for India in fiscal 2013, which is expected to pick up to 5.1 per cent next year.
India's GDP growth slowed to 5 per cent in the year ended March 2013 from an average of 8 per cent over the past decade.
"So some of the cooling is just that, which in many ways is welcome because if you continue to pump in... at that rate, obviously, the economy will overheat," Duttagupta said.
Prime Minister Manmohan Singh has said the government is committed to getting India back to a sustainable growth path of 8-9 per cent.
Asked if countries such as India can return to days of 8 per cent-plus growth rates, Duttagupta said it is neither possible under current circumstances nor advisable.
"Whether it is 8 per cent for some countries or it is 10 per cent for China, it is not possible to go there simply because it is also not advisable," Duttagupta said.
The IMF said domestic factors have played a major role in the sharp drop in India's growth rate.
"We still see investment recovery to be very slow. A lot of supply-side bottlenecks, say constraints in the mining sector, in the power sector, as well as, in general, investment sentiment has been very weak in terms of slow project approvals," Duttagupta said.
These factors have played a role in keeping investment subdued, Duttagupta said.
"Also, given much tighter monetary conditions, given the higher inflation, higher interest rates have played a role in keeping consumption demand pretty subdued," Duttagupta said.
However, the funding agency said there are indications of a growth revival in India, including the recent and significant depreciation in the exchange rate in real effective terms and a strong rebound in farm production.
"So, built on these factors – and high-frequency indicators show that even investment growth is picking up – we expect growth to pick up next year," the IMF official said.
Responding to questions later, Duttagupta stressed the importance of targeted subsidies and the need to do away with generalised subsidies, which, she said, normally ends up benefiting the rich.