Finance Minister P Chidambaram said the Reserve Bank of India's assessment of his Budget was "largely favourable".
Addressing the media after the customary post-Budget meeting with the RBI's central board, which lasted over three hours, Chidambaram said the bank sought greater clarity on certain issues. He, however, did not spell out the issues.
In their interaction with the minister, the directors in the RBI central board warned him that unless investment in infrastructure was stepped up, it would be difficult to accelerate the country's industrial growth. They argued for stepping up both public and private sector investment.
Chidambaram told the central board that as the government made progress in achieving the objectives spelt out in the Fiscal Responsibility and Budget Management Act, more headroom would become available for making public investment in infrastructure.
In his discussion with the board, Chidambaram explained the philosophy and the politico-economy background against which the Budget was prepared. He said the Budget reflected the complex mandate given by the people to the new government.
The Budget had looked seriously into problems relating to drinking water, education, basic healthcare, roads and employment in rural areas and proposed several schemes to bring about improvements in these areas.
While the Budget can provide funds for the various schemes, Chidambaram says there is a need to strengthen the delivery system. He emphasised that investment was the key to both agricultural and industrial growth and pointed out that both public and private investment in agricultural had been falling in recent years. He hoped that the tax break given to agro-business would promote greater activity.
Earlier, welcoming the finance minister, RBI Governor YV Reddy said in the central bank's assessment, the Budget outlined the new government's economic strategy of focussing both on growth and equity. He also noted that the emphasis on fiscal consolidation and Chidambaram's strong commitment to the FRBM Act would contribute to the growing strength of the economy.
The RBI board also seconded the Budget's priority to agriculture, which it said, was essential for accelerating the overall growth of the economy and for ensuring the welfare of the 60 per cent of the agriculture-dependent population of the country.
The meeting was attended by Tata group Chairman Ratan Tata, DLF Group Chairman KP Singh, Finance Secretary DC Gupta, Chief Economic Adviser Ashok Lahiri, Revenue Secretary Vineeta Rai, Financial Sector Secretary NS Sisodia and Expenditure Secretary D Swarup.