"India start as favourites. They are a very good team. They have good young bowlers and are also a good batting side," Waugh said at a press conference.
Picking up young pacer Irfan Pathan for special praise, Waugh said that the Baroda bowler was "most promising".
On Pakistan, he said, the Inzamam-ul Haq-led side had "unlimited potential", but needed to properly harness their talent to make the series close.
Asked whether Pakistan's bleak performance in Australia would have an impact on their showing in India, Waugh said, "They played well in Australia in patches, but did not prove very competitive in the long run. They failed to sustain the momentum and handle the pressure. If they are consistent, they will do well in India".
While describing pacer Shoaib Akhtar as a "top bracket world class cricketer", Waugh said that the controversies surrounding him were internal affairs of the side, but added that coach Bob Woolmer had it in him to handle matters on discipline.
"Bob Woolmer is a strong coach. It is his job to make his side disciplined," he said.
Waugh said this year's Ashes series would see a good contest as England now looked a good side.
"They are looking more purposeful, enjoying the game, and there is a togetherness in the side," he said.
England recently became only the second team after Australia to win a Test series in South Africa after the Proteas returned to international cricket in 1991.
Underscoring that English players like Andrew Flintoff and Steve Harmison could be difficult proposition for any rival on their day, Waugh said it would be a tough series, though it was diffcult to beat Australia as they were the dominant team in the world now.
He said Australia could also expect a tough series in New Zealand ahead of the engagements against England as the Kiwi wickets would suit the hosts.