Stronger agricultural growth and public sector consumption have failed to compensate for sluggish industrial production, investment and exports. This is a substantial slowdown compared to previous years, and the question is whether and when recovery will occur. Persistent high inflation and low productivity have contributed to a loss of competitiveness. High government transfers through social security schemes also raised wages, especially in rural areas, rural real wages that had been flat earlier showed a substantial rise after 2007 when high food inflation and rural employment programmes set in. Real INR depreciation combined with a projected increase in external demand should increase exports.