Finance minister Pranab Mukherjee today called on state governments to strive for a faster return to fiscal consolidation, without compromising on the growth initiative.
Addressing a pre-Budget meeting of finance ministers of states and union territories in New Delhi today, Mukherjee also touted the proposed general sales tax (GST) and the new direct tax code as paths for achieving growth without sacrificing the Fiscal Responsibility and Budget Management (FRBM) targets.
"The high levels of public spending and decline in revenue streams have resulted in deviation from the FRBM targets," he said, adding that a return to the path of fiscal consolidation at the earliest "without compromising the growth momentum" is in the long-term interest of the economy.
He said the implementation of direct taxes code and the GST would lead to broadening of tax base, simplification of the tax structure, leading also to improvement in tax compliance.
Mukherjee asked states holding large cash balances to utilise the surpluses for development activities.
Expressing concern over the increase in food prices, including that of rice, wheat, pulses, vegetables, etc, the finance minister said that the price rise in sugar could be attributed to demand side issues, but the price rise in rice, wheat, pulses, vegetables etc was primarily a supply side issue that need to be collectively addressed both in the short and the medium to long term.