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RBI will ensure liquidity to sustain growth momentum, says FM

Special Correspondent

Emphasises adequate financing of manufacturing and services

— Photo: V. Sudershan

ENOUGH LIQUIDITY: The Union Finance Minister, P. Chidambaram (left), addressing the Central Board of Directors of Reserve Bank of India at its post-Budget meeting in New Delhi on Saturday. The RBI Governor, Y. V. Reddy, looks on.

NEW DELHI: The Union Finance Minister, P. Chidambaram, on Saturday said the Reserve Bank of India has assured the government that it would make available enough liquidity in the economy so that the productive sectors were not hampered and starved of investment.

Briefing newspersons after his customary post-Budget meeting with the RBI board here, Mr. Chidambaram said: "RBI will provide liquidity to all productive sectors of the economy so that the growth story is not hampered."

At the meeting, co-chaired by the RBI Governor, Y. V. Reddy, the Finance Minister particularly emphasised that enough funds should be provided to the two fast growing sectors, namely, manufacturing and services, and asked the Central bank to ensure adequate liquidity so that the "growth story that is unfolding" was not hampered.

The RBI and the Government, Mr. Chidambaram said, would work jointly to put in place a system for implementing the budget proposal for providing concessional short-term credit (crop loans) to farmers for the kharif and rabi seasons.

Under the budget provision, small and marginal farmers are to be provided crop loan at an interest of seven per cent to tackle their problem of indebtedness. The scheme is to cost the exchequer Rs. 1,700 crore annually (by way of subvention to banks).

The RBI, Mr. Chidambaram said, lauded the efforts made in the Budget to bring about fiscal prudence and raise the tax-GDP ratio beyond 11 per cent. "Our adherence and commitment to the Fiscal Responsibility and Budget Management (FRBM) target in the budget was appreciated, so also the efforts to raise the tax-GDP ratio to over 11 per cent," he said.

The meeting was attended, among others, by the Finance Secretary, Adarsh Kishore, the Secretary (Economic Affairs), A. K. Jha, and the RBI Deputy Governors, Rakesh Mohan, V. Leeladhar, S. Gopinath and Usha Thorat.

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