However, the survey forecast a relatively optimistic growth rate of 6.1% to 6.7% for the next fiscal, saying the slowdown may have bottomed out and the economy has showed signs of green shoots.
The economic growth rate in the current financial year is expected to slip to a decade's low of 5% from 6.2% in 2011-12 and 9.3% in the previous year. Last year, the survey had projected a growth rate of 7.6% for 2012-13.
The boost to demand given by monetary and fiscal stimulus following the crisis was large. Final consumption grew at an average of over 8% annually between 2009-10 and 2011-12. The result was strong inflation and a powerful monetary response that also slowed consumption demand," the survey said, explaining the reasons behind the drop in the growth rate.
Starting in 2011-12, corporate and infrastructure investment started slowing, both as a result of investment bottlenecks as well as the tighter monetary policy. Even as the economy slowed, it was hit by two additional shocks: a slowing global economy, weighed down by the crisis in the euro area and uncertainties about fiscal policy in the US, and a weak monsoon, at least in its initial phase," it added.
These are difficult times, but India has navigated such times before and with good policies, it will come through stronger, chief economic advisor Raghuram Rajan said.
Rajan said shifting of national spending from consumption to investment and removing the bottlenecks to investment, growth and job creation, besides making efforts to cut cost of funds, are required to prop up the economy.
As growth slowed and government revenues did not keep pace with spending, the fiscal deficit threatened to breach the target. With government savings falling, and private savings also shrinking, the current account deficit which is the investment that cannot be financed by domestic savings and has to be financed from abroad also widened, the survey said. In the current year, private final consumption expenditure has slowed considerably, from 8% in 2011-12 to 4.1% in 2012-13.