According to the global financial services major, the structural drivers of growth are likely to benefit from reforms but external headwinds remain strong.

As per government estimates, the economy will grow by 7-7.5 percent during financial year 2015-16.

On prices, the report said, the output gap is not closing fast enough to reverse the disinflationary momentum and hence Reserve Bank could continue with an accommodative stance.

The global brokerage firm expects CPI inflation to average 5.3 percent in FY17 as against 4.9 percent in FY16.

According to the report, the FY16 fiscal deficit for the Central government could slip to 4.1 percent of GDP on lower nominal GDP growth.

Overall, 2016 could be a year of consolidating a cyclical recovery in a challenging global environment.

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