For the first time in four months, Finance Minister Arun Jaitley has called for a reduction in interest rates, saying lower rates would trigger demand for homes. Talking to a newspaper, he said, inflation seems to be stabilizing somewhat and the time seems to have come to moderate the interest rates.

The Reserve Bank, which has kept rates unchanged, has maintained that despite recent moderation, inflation remains a challenge. Mr Jaitley identified two key concerns of the government regarding the economy. The first was low credit off-take, and the second, tepid performance of the manufacturing sector. He said banks have been inhibited by the doubtful loans -NPAs on their books, and this had created defensive banking.

He disclosed that the Prime Minister would shortly call a meeting of bank chiefs and urge them to be more liberal with credit, while assuring them of full support. That would be the first time that Mr Modi will meet bank chairmen on accelerating credit flow. The talks come in the wake of bank credit growth slowing to a 13-year low.