India’s financial economic growth could hit a four-year-low this year.

India's economic growth in the financial year 2018 may be the slowest in four years at 6.75%, before it rebounds to between 7% and 7.5% in the next fiscal, according to the annual economic survey released by the government today (Jan. 29).

"Growth is picking up partly because the temporary impact of demonetisation and GST have dissipated, and corrective actions have been taken. I think the government is injecting a fair amount of demand into the economy. Above all, I think exports have picked up quite briskly in the last three quarters," chief economic advisor (CEA) Arvind Subramanian said, underlining the Narendra Modi government's reform efforts to resuscitate growth. However, he also warned against growing global risks such as rising oil prices and the possibility of sudden capital outflows.

India added "roughly about 1.8 million additional tax payers due to demonetisation and GST, representing 3% of existing taxpayers," the survey said, outlining the impact of the twin measures that at least temporarily took the wind out of Asia's third-largest economy.

Nonetheless, these figures represent the first government estimate on the base following the disruptive November 2016 note ban. The caveat: Most of the new tax filers were in the lowest tax bracket, the report added.

Three days before finance minister Arun Jaitley presents the budget for financial year 2019, the CEA also pointed out that government policies must incentivise investments. "The animal spirits must be conjured back," the survey noted, stressing that preserving macro-economic stability and the sale of Air India should be priorities. The report added that the government must "shrink unviable banks"—it recently announced a capital buffer of Rs1 lakh crore for India's ailing state-owned banks in the current financial year, without laying out a roadmap for possible mergers.

For the medium term, the survey emphasised that employment, education, and agriculture must be the focus.

On exports, it underscored that competitiveness of Indian exports had not improved in recent years and that had resulted in the declining share of export manufacturing in India's GDP. "After remaining in negative territory for a couple of years, growth of exports rebounded into positive one during 2016-17 and (are) expected to grow faster in 2017-18," the survey added.

Subramanian's report has also pegged India's agriculture growth at 2.1% for financial year 2018, sharply lower than the 4.9% a year earlier. This estimate comes with a warning that the government's goal to double farmers' income by 2022 will demand radical steps, including "replacing un-targeted subsidies (power and fertiliser) by direct income support, and dramatically extending irrigation but via efficient drip and sprinkler technologies."

The survey further warned that "climate change—whose imprint on Indian agriculture is already visible—might  reduce farm incomes by up to 20-25% in the medium term."