The immediate challenge before the government is to increase the growth rate as it will boost both economic activities and revenue collections, finance minister Arun Jaitley said.
The finance minister was making the opening remarks during his pre-budget meeting with state finance ministers.
He said that as per different estimates, the growth rate is expected to be in the range of 6 to 6.5 per cent during 2015-16, even though Indian economy has a potential to grow at a much higher rate.
Jaitley said the growth in service sector has been quite good while growth in agriculture remained reasonable. However, the patchy growth in the manufacturing sector is one of the biggest challenge for the government, he said and sought state's help for putting India back on the path of higher growth rate.
The finance minister referred to the prime minister's statement that in the federal structure, the centre and states together constitute 'Team India' - ''India grows when the states grow'' - he stated.
He told the forum that active reform steps have been taken and some more steps would be taken in the coming months.
Jaitley informed the state CMs/FMs that the Fourteenth Finance Commission (FFC) has submitted its report, which is under the consideration of the central government.
Participating in the discussion, finance ministers of different states and union territories requested the union finance minister to consider the same while formulating the Union Budget 2015-16.
State governments made suggestions related to goods and services tax (GST), streamlining and decentralisation of centrally sponsored schemes(CSS), fiscal transfers to states, state specific economic issues, infrastructure related issues, inter linking of rivers, financial inclusion etc.
Other suggestions include more allocations of funds directly to the states. Some states asked for tax holiday in order to increase investment in their states. Mining states called for removal of export duty on iron ore among others. Some states asked for increasing the limits of borrowing keeping in view FRBM requirements and the decrease in rate of market borrowing etc, while some other states called for more funds under JNNURM for urban renewal mission and encouragement to the SME sector.
Some sought declaration of water as a national asset, restructuring of MGNAREGA and provision of remunerative prices for agriculture produce in lieu of minimum support price (MSP) among others.
In his concluding remarks, the finance minister assured the states that the suggestions made by the state representatives in the meeting and the memorandum submitted by them would be duly examined and would be used as valuable inputs to the Budget 2015-2016.
He also emphasised the need to address regional disparities through evenness of growth among states. While maintaining the imperative of growth fiscal discipline cannot be compromised, the finance minister indicated that cooperative federalism has been the underlying theme of the financial management by his government.
The finance minister reiterated that economic spin-off of implementation of GST will be hugely beneficial to both the centre and the states.
Most of the states supported and welcomed the initiative of the central government regarding the implementation of GST, the provision of Rs11,000 crore in the current fiscal for CST compensation to the states and assurance of the central government of due compensation to states suffering any loss due to GST implementation.