Standard Chartered said it expects the Reserve Bank of India to reduce interest rates by 75 basis points in 2012/13, lower than its prior forecast of cuts totaling 150 basis points, citing higher crude oil prices and a domestic excise duty hike.
"We expect WPI inflation to average 7.5 percent in the second half of 2012/13, much higher than 6.9 percent in the first half of the fiscal," it said in a note on Tuesday.
"This should cause the central bank to pause its easing cycle from September 2012 onwards as inflation moves above its comfort zone again."
The wholesale price index, India's main gauge of inflation, edged up a faster-than-expected 6.95 percent from a year earlier in February. Standard Chartered raised its estimate for average WPI in 2012/13 to 7.2 percent from 6.5 percent.
In its mid-quarter policy review on March 15, the RBI kept its repo rate on hold at 8.50 percent for the second straight time. After the annual budget on Friday, it said the timing of an interest rate cut hinges mainly on global oil prices and domestic growth.
Standard Chartered expects a rate cut on April 17, when the central bank will announce its annual monetary policy statement, with two more 25 basis point cuts each in June and July.
It also cut its growth forecast for India for the fiscal year starting in April to 7.1 percent from 7.4 percent. New Delhi has set a growth target of 7.6 percent for the period.