The Reserve Bank of India (RBI) may increase the repo, reverse repo and cash reserve ratios of banks by around 50 basis points at its annual policy announcement due on 20 April, in a bid to tame price pressures, according to note by DBS Bank.
Ramya Suryanarayana, economist at the bank, was quoted by Reuters, as saying that inflation was increasingly a risk and it was important the central bank did not fall behind the curve wrote in the note.
Wholesale prices were up 9.90 per cent from the last year's level, according to Thursday's data, the report says.
The report says inflation in March was at the strongest since October 2008, reflecting a sharp rise in price pressures recorded this year, prompting RBI to hike interest rates in mid-March for the first time since the global downturn.
According to the bank, inflation in the current fiscal year would rise to an average 6.5 per cent and ease to 5.3 per cent in the next fiscal year, the report says.
"We think the only way to keep inflation under check is to tighten policy," the report quotes Suryanarayana as writing in the note.