As disinflationary forces stabilise oil, rural wages, negative output gap, MSP the report expects underlying core CPI inflation to remain above RBI's 5 percent target in March 2017.

In the fifth bi-monthly monetary policy review last week, RBI kept the repo rate unchanged at 6.75 percent.

Nomura further said it expects GDP growth to rise to 7.8 percent y-o-y in 2016, from 7.3 percent in 2015, aided by private and government consumption and a slight pick-up in investments.

Nomura expects a slight slippage in the fiscal deficit to 3.6 percent of GDP in 2016-17 as against the target of 3.5 percent and a smaller rise in government-funded capital expenditure.

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