With inflation declining to single digit level, Finance Minister P Chidambaram today said interest rates may soften further and also made a case for revisiting reforms to make the economy more competitive.

Addressing the Economic Editors' Conference here, the finance minister said Indian economy would continue to grow at 7-8 per cent, the second fastest rate in the world, this fiscal and asked analysts not to describe the Indian economy as slipping into recession even though the country faces a difficult situation.

Replying questions on interest rates, the finance minister said many public sector banks had already reduced their home loan rates by 75 basis points. However, when probed further as to why private sector lenders are not responding, he said, "I cannot give any advice to private sector banks."

Inflation has come down to 8.90 per cent, easing pressure on Reserve Bank of India to ease money supply. The apex bank has already cut one of the policy rates, repo (short-term lending rate) to 7.5 per cent from nine per cent in phases.

Even as India experienced the impact of global financial crisis on the equity and forex markets directly and on the money, debt and credit markets indirectly, Chidambaram said the macroeconomic fallout has been muted due to the overall strength of domestic demand and predominantly domestic nature of financing investment.

However, there is a silver lining in this crisis, he said, adding, "We have to seize the opportunity to review and revisit pending reforms. As and when required, we must introduce measures, particularly in the financial sector, to make our economy more competitive," he said.

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