The Union Finance Minister Shri Arun Jaitley said that the Union and the States must complement each other in managing the economy and fiscal policy which is the essence of cooperative federalism. They must act like a “Team” in doing so, he added. The Finance Minister Shri Jaitley emphasised the need to address regional disparities through evenness of growth between States. While maintaining the imperative of growth, fiscal discipline can not be compromised, he added. The Finance Minister stated the need of “rounding off corners” towards implementation of GST. He also emphasised the need for states to address supply side bottlenecks to manage inflation in the economy. The Finance Minister reiterated the commitment to allow greater autonomy to States in scheme implementation. It was noted that some initial steps have been taken in this direction. Reforming Public distribution system was stated to be high on the agenda of the Government, he added.The Finance Minister said that the Mandate of 2014 clearly spells out that economic growth cannot be compromised at any cost and sine quo non to reap the benefits of the demography dividend. He said that we owe it to our youth and under-privileged that we partner in this process of growth and its equitable redistribution. The Finance Minster further added that his Government is committed to evolve a model for national development which is driven by the States and intends to extend necessary flexibility to the States in achieving this. However, he urged the States to be fiscally responsible with this greater devolution of power. The Finance Minister was addressing the Finance Ministers of different States and Union Territories (with legislature) as part of his Pre-Budget Consultation process here today.

Along with the Finance Minister, the meeting was attended by Ms. Nirmala Sitharaman, Minister of State for Finance and Corporate Affairs, Dr. Arvind Mayaram, Finance Secretary, Shri Rajiv Takru, Revenue Secretary, Shri G.S. Sandhu, Secretary, Financial Services and other senior officers of the Ministry of Finance and the States and Union Territories among others.

The meeting was also attended by Minister of State for Finance, , officers of State and Central Government. From the States/UTs, the meeting was attended by six Chief Ministers, holding Finance portfolio, 18 Finance Ministers/ Ministers representing their Finance Ministers of States including Lt. Governor of Delhi, Shri Najeeb Jung, Chief Minister of Rajasthan, Smt. Vasundhra Raje, Chief Minister of Goa, Shri Manohar Parrikar, Chief Minister of Sikkim Shri Pawan Chamling, Chief Minister of Nagaland Shri T.R. Zeliang, and Chief Minister of Manipur, Shri Okram Ibobi Singh among others.

Various suggestions were made by the representatives of different States/UTs during the meeting. Some of the suggestions made during the aforesaid meeting included revival of growth in the economy and curbing of inflation especially food inflation, payment of compensation to the States for phasing-out Central Sales Tax (CST), revision of royalty on minerals, and creation of job opportunities especially in rural areas among others.

State Governments also suggested higher investment in infrastructure, boosting of industrial growth and need for job creation. Rationalisation of taxes and duty were also sought by some State Governments. Union territories also suggested that they may be made a part of Finance Commission award. States expressed concern regarding the likely impact of the VII Central Pay Commission award on their finances. It was suggested that consultative process for implementation of VII CPC award must also include the States.

States expressed concerns regarding certain provision of new Land acquisition law and its impact of infrastructure projects and investments. States also pointed towards provisions of Environmental laws and their adverse impact on completion of critical infrastructure projects. Views were also expressed towards bringing the CAMPA funds lying in the Bank Accounts to Consolidated Fund of India and redeploying these amounts for environmental regeneration. There were a few common issues such as factoring State’s uniqueness in Central Schemes and CST compensation raised by State governments.

Other suggestions included focus on and promotion of MSME sector for creating more employment opportunities in rural areas, mechanism in GST to protect the revenue of the States, opening of more bank branches in rural areas to focus on financial inclusion, incentives for promotion of exports, building of investors’ confidence about forthcoming Government policies, restructuring of State Electricity Boards to make them financially viable, rationalization of duty structure as presently it is adversely affecting the growth of industries. Flexibility in implementation and allocation of funds under Central Sponsored Schemes according to the requirements and needs of each specific State/UT and tax relief in backward districts among others.

The Finance Minister Shri Jaitley assured the States and the UTs that the issue raised and suggestions made by the different States/UTs will be looked into in detail and all efforts made to address them.

Cooperative federalism: state fiscal autonomy and flexibility urged alongside fiscal discipline to support growth and curb inflation. Management of the economy requires cooperative federalism with Union and States coordinating growth and fiscal policy; States should receive greater devolution and flexibility in scheme implementation while maintaining fiscal discipline. States urged measures to revive growth, curb food inflation, create rural jobs, boost infrastructure and industry, seek CST compensation, GST revenue protections, consultative implementation of pay commission impacts, address land and environmental law effects on projects, and allow flexibility in central scheme allocations; the Finance Minister committed to detailed consideration of these suggestions.