RBI governor says government's budget 'fiscally prudent'

NEW DELHI (Reuters) - Reserve Bank of India Governor Raghuram Rajan said on Saturday the government's 2016/17 budget had been "fiscally prudent", and the establishment of a monetary policy committee to set interest rates would help the central bank fight inflation.

The comments, at a speech in New Delhi, build on comments earlier in the day when Rajan had said the RBI's board had praised the budget unveiled by the government in a meeting with Finance Minister Arun Jaitley.

"The recent central budget emphasized fiscal prudence and adhered to past commitments, even while allocating resources towards capital spending and focusing on structural reforms, especially in agriculture," Rajan said.

Rajan also reiterated the central bank would not target an exchange rate for the rupee and would only intervene to curb volatility. RBI would focus on steadily increasing foreign investment limits in government bonds, he said.

(Reporting by Neha Dasgupta; Editing by Sumeet Chatterjee)