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India FinMin: I want an RBI rate cut

The chorus calling for India's central bank to lower interest rates at its meeting next week gained a new voice, with the finance minister telling CNBC he also wants a cut.

"As somebody who wants India's economy to grow and who wants domestic demand to grow, I would want the rates to come down," India's Minister of Finance Arun Jaitley told CNBC .

But having entrusted the Reserve Bank of India (RBI) with this responsibility, Jaitley said he was sure that the central bank was aware of economic developments and expressed confidence that the RBI will appropriately act with a sense of responsibility.

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"I am certain that the RBI (Reserve Bank of India), along with the governor and all his other colleagues, will come to a very balanced decision," he said. The RBI's next meeting is on Sept. 29.

Jaitley's push for a rate cut from the current 7.25 percent level follows the country's top economic advisor, Arvind Subramanian, saying earlier this month that he is concerned about deflation, not inflation in Asia's third largest economy. Consumer price inflation in August slowed in August, with prices rising 3.66 percent on-year, while the wholesale price index dropped 4.95 percent on-year in the month.

The calls for a rate cut come as India's economy is slowing, with growth around 7 percent in the April-to-June quarter. Moody's in August cut its gross domestic product (GDP) growth forecast to 7 percent for this year from its previous 7.5 percent forecast over concerns that the monsoon season was a disappointment.

Jaitley is hoping a rate cut will boost some sectors of the economy.

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"Real estate, for instance, is a sector which can give a big push to India's growth and that's a sector which is impacted because of high policy rates," he said. "If policy rates do come down over the next year or so, certainly this a sector which has a huge potential to grow."

India's property sector has suffered from subdued demand and a rise in unsold inventory across different regions, Moody's noted in a report earlier this month.

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"Cuts in interest rates by the Reserve Bank of India, if passed on by the banks, will filter down to the property market, reducing the cost of borrowing for developers as well as buyers, and supporting demand," Vikas Halan, senior credit officer at Moody's, said in a statement.

Analysts have also looked somewhat askance at the current level of India's benchmark interest rates.

"The rates have not been dropped in line with a lot of other economies in the world," Sundeep Sikka, chief executive at Reliance Capital Asset Management, told CNBC Monday. "I think [a cut is] going to be sooner rather than later. There is clearly a need."