Reserve Bank of India Governor Bimal Jalan said on Saturday the fiscal deficit remained a difficult problem but overall macro-economic conditions were favourable for accelerating growth.

Jalan said the average rate of inflation continued to be satisfactory despite some adverse impact from a drought and increase in oil prices.

He said the economy was strong enough to take care of any eventuality arising out of adverse international developments.

"Assuming normal monsoon in 2003-04, circumstances were propitious for a substantial increase in growth rate," Jalan told reporters.

"As of now it is continuing," Jalan said, when asked whether the central bank would continue with its soft interest rate policy.

Jalan said inflation will come down further once the Iraqi crisis is over and the monsoon is normal.

Even now, barring the drought-related commodities and the high international oil prices in view of the threat of war in West Asia inflation is 'comfortable' at about 3 per cent, he told reporters after attending a meeting of RBI board members with Finance Minister Jaswant Singh.

"We hope that once the war clouds disappear over a period of time and the monsoon is normal, we will be back to low inflation levels," Jalan said.

The inflation rate, based on the wholesale price index, was 4.69 per cent during the week ended March 1.

Jalan, however, said fiscal deficit continued to be a problem area, though it was not affecting the macro economy.

The customary post-Budget meeting of the RBI board felt that the macro economic circumstances in the country are 'sound' with low inflation, high foreign exchange reserves and the potential for high growth.

The Budget would contribute to consolidation of these factors further, the central bank governor said.

He said the finance minister explained his strategy in the Budget and there was a great deal of welcoming of the Budget provisions.

Several macro economic suggestions, including on monetary management and the fiscal situation, were made to the finance minister which he will consider during the course of the year.

Additional inputs: UNI