Jaitley calls for convergence of central and state govt policies

09 June 2014

The central government wants states to be equal partners in driving the nation's economic growth and charting the course of development, finance minister Arun Jaitley told a meeting of state chief ministers and finance ministers in the capital today.

''It is the policy of this government that ''Team India'' shall not be limited to the government sitting in Delhi but will also include states as equal partners in the growth of this great Nation,'' Jaitley said during consultations with states and union territories ahead of finalising the main budget for the 2014-15 financial year.

The central government is concerned over the diverse economic policies followed by the centre and the various state governments, especially in sectors such as retail trade biotechnology etc, areas that policymakers consider as high growth areas.

''Union and the states must complement each other in managing the economy and the fiscal policy. This is the essence of cooperative federalism. It has been noted that while the growth of the country has crawled at sub 5 per cent in the recent years there have been states registering much robust growth. This is clearly a case of sum being less than its parts and needs to be addressed through our concerted efforts'' said Jaitley.

He said the mandate of 2014 clearly spells out that economic growth cannot be compromised at any cost and is sine quo non to reap the benefits of the demographic dividend.

''We owe it to our youth and underprivileged that we partner in this process of growth and its equitable redistribution.''

Pointing to the abysmal performance of the manufacturing sector and the negative growth registered by the mining and quarrying sectors, Jaitley said the investment cycle has been disturbed and the negative sentiment has affected trade, hotels and transportation sectors, which are posed for a slower growth compared to last year.

The slow-down in economic growth coupled with high inflation - which rose to 8.9 per cent in April - poses a challenge to the macroeconomic environment.

Tax collections stood at 10 per cent of the country's GDP compared to the initial budget estimates of 10.9 per cent.

''India can ill afford this trend and I believe that deliberation held today will be the first of the series of such deliberations and we will together steer the economy in the mutually agreed direction,'' he said.

He said the central government is committed to evolving a model of national development which is driven by the states and the states would have the necessary flexibility in achieving this with greater devolution of power.

''Intergenerational equity must be kept in view while deciding today's spending. I appreciate the fact that most of states have been conforming to the FRBM targets. We must carry this forward,'' he said.

He also sought consensus among states on the long-pending issue of implementation of the Goods and Services Taxes (GST) at an early date for the integration is dependent partly on this.

While there is convergence of views on many issues, he said there are some vexatious issues which could be resolved sooner than later.

He also sought suggestions from state governments for improving implementation of various welfare programmes of the central government.

''Long inflationary trends have adversely impacted the food and nutritional security of the common man. We are committed to breaking this vicious cycle of high inflation and high interest rates. While, we look forward to your support in tackling temporary fluctuation in prices, we also would like to evolve a mechanism which addresses the structural issues that create supply bottlenecks,'' he said, adding, ''We need to look at the Essential Commodities Act and put in place strict measures and special courts to stop hoarding and black marketing.'

Jaitley also pointed to the need for creating a single agriculture market and real time information dissemination on prices to farmers and consumers.

In this regard, he said, these goals cannot be achieved without active cooperation of states and urges them to address the areas of agriculture extension, public investment in agriculture, including irrigation and agriculture marketing which fall under states' purview.

While there is a National Food Security Act, he said, the need of the hour is to implement the law in a cost effective and efficient manner for ensuring real ''Food Security''. PDS as a vehicle to shield the poor from price rise has to be significantly improved.

Restructuring FCI for greater efficiency in delivering food grains is also on the agenda, he said, adding that decentralised procurement of food grains provides an alternative and more effective model for food grain administration.

Growth, he said, can be revived through increased investment in the areas of Infrastructure. ''We have to think big and build an infrastructure which can cater to a growing population in coming years.''

A similar approach is also required to modernise Industries. ''We should no longer remain a market for global industry rather we should become a global manufacturing hub,'' he said.

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