India said Monday it expects economic growth to rise to between 7 and 7.5 percent in the next fiscal year as the negative impact of two controversial reforms diminishes.
The economy is expected to grow 6.75 percent this fiscal year on the back of a recovery in the second half, the government said in its economic report released before the annual budget.
Growth has been hit by the introduction of a new national goods and services tax (GST) last year and by a controversial 2016 move to withdraw all high-value banknotes from circulation.
The economy has also been helped by a rise in exports, the government's chief economic adviser Arvind Subramanian told reporters.
"Growth is picking up because the temporary impact of demonetisation and GST have dissipated, corrective actions have been taken and the government is injecting a fair amount of demand," he said.
"The direction is very good. The level is still below potential.But in terms of directionality, the economy seems to be picking up quite nicely, quite robustly," Subramanian said.
Prime Minister Narendra Modi swept to power in 2014 on a promise to attract foreign investment and create jobs for a burgeoning youth population.
In its report, the government said creating employment for young people would remain a key priority before a general election that must be held by May next year.
It also expressed concern about falling rural incomes, saying climate change was having an adverse impact on farm yields.
"Climate change could reduce annual agricultural incomes in the range of 15 percent to 18 percent on average, and up to 20 percent to 25 percent for unirrigated areas in India," it said.
Less than half of India's farmland is irrigated, with the rest reliant on rainfall.