Union Finance Minister Arun Jaitley on Wednesday said the sluggish growth in the current fiscal will be replaced by a higher trajectory in 2017-18 as India's macroeconomic stability was sound, though the global scenario could pose three major challenges.

"Sluggish growth will be replaced by high growth. Growth in a number of emerging economies is expected to recover in 2017. The outlook is positive for next year," Jaitley said here while presenting the Union Budget 2017-18.

There are three challenges for next year on the global front, he said.

"US Federal Reserve may increase interest rates in 2017 that may lead to increased outflows from emerging economies. Current monetary stance of the Fed is one of the challenges," he said.

"Crude oil prices have an impact on the emerging economies. Uncertainty around commodity prices, especially around crude oil, is the second major challenge," he added.

The third challenge, Jaitley said, were signs of retreat from globalisation which would affect exports from emerging economies.

"Signs of increasing retreat from globalisation as protectionism is building up. It has potential to affect exports from many emerging economies, including India," he said.

The Economic Survey, released on Tuesday, sharply cut the GDP growth for 2016-17 to 6.5 per cent, from 7.6 per cent last financial year.

The growth is likely to return to trend in 2017-18, following a temporary decline in 2016-17, said the Survey, while predicting the GDP to expand by 6.75-7.5 per cent in the next fiscal.

Jaitley added that India's macroeconomic stability continues to be the foundation of India's economic success.

"Favourable price developments reflect prudent macroeconomic management," he said.

The Consumer Price Index (CPI) inflation dropped from 6 per cent in July, 2016, to 3.4 per cent in December, 2016.

In the next year, the CPI inflation is expected to remain within the 2-6 per cent range, he said.

"India is expected to be one of the fastest growing economies in 2017. Inflation has been controlled. We are seen as an engine of global growth," he added.

The International Monetary Fund (IMF) estimates world GDP to grow at 3.1 per cent in 2016 and at 3.4 per cent in 2017.