Borrowing costs have surged as the central bank raised its policy lending rate 13 times between early 2010 and late 2011 to control inflation.

WSJ: India Car Sales Set to Fall This Fiscal Year

The central bank cut its policy lending rate by a quarter percentage point in late January it was the second rate reduction in four years but also cautioned that it had limited space for further policy easing.

WSJ: India's Trade Deficit Narrows

According to the World Bank, good monsoon rains this year and a stable local currency could further reduce inflation from current levels, allowing the central bank to further ease monetary policy after cutting its key lending rate twice already this year.

WSJ: World Bank: India's Economy Is Recovering