Inflation in India is expected to fall to 4.5 per cent by the quarter ended March 31, and this in turn would give Reserve Bank space to cut key policy rates by 50 basis points this fiscal, says a Morgan Stanley report.

According to the global financial services major, disinflationary pressures would keep RBI on an easing path. "We expect a 50 bps cut in the policy rate by quarter ended March 2017," Morgan Stanley said in a research note. In the June policy review meet, RBI Governor Raghuram Rajan kept interest rates intact, citing rising inflationary pressure, but hinted at a reduction later this year if good monsoon helps ease inflation. The report further noted that inflation is expected to fall to 4.5 per cent by quarter ended March 2017.