Following is the text of the speech of Finance Minister Shri Pranab Mukherjee at the Conference of the Finance Ministers of States held as part of pre-budget discussions here today:

"I am very happy to see the Chief Ministers and Finance Ministers of States and Union Territories here today. In a federal set up like ours, pre Budget consultation with the State Finance Ministers is of paramount importance. Today's pre Budget meeting is perhaps the first of its kind.

Our Country has witnessed unparalleled average growth of 8.5 per cent during the last five years. The process of fiscal consolidation also gained momentum during this period. The combined fiscal deficit for Centre as well as States was brought down from 8.9 per cent of GDP in 2003-04 to about 5 per cent in 2007-08.

While the Country was riding on a high growth trajectory, the World economy was hit by three unprecedented crises during 2008-09 - first, the petroleum price rise; second, rise in prices of food grains; and third, the breakdown of the financial system. The combined effect of these crises of high magnitude in developed countries was bound to affect the developing economies and our Country was no exception.

When the problem hit us in the second half of the financial year 2008-09, we immediately responded by announcing three stimulus packages on 7th December 2008, 2nd January and 24th February, 2009. These fiscal measures were supplemented by various monetary initiatives from the Reserve Bank of India. Consequently, in a difficult year like 2008-09, when most of the economies struggled to stay afloat, India has recorded GDP growth rate of 6.7 per cent and is the second fastest growing economy in the world. The recent data release on the performance of six core industries namely crude oil, petroleum refinery products, coal, electricity, cement and finished steel during April 2009 gives us further confidence of bringing back the economy on to growth path.

You may recall that in our stimulus packages special emphasis was given on increased capital expenditure and rural infrastructure. Additional resources were transferred to States for implementing programmes like NREGS, IAY, JNNURM, AIBP etc. Further, State Governments were allowed to raise additional market borrowings of 0.5% of their Gross State Domestic Product (GSDP) both in 2008-09 and 2009-10. The idea was to help the States in maintaining the momentum of public expenditure. I would like to get a feedback from the Chief Ministers and Finance Ministers about the outcome of these initiatives at the State level. The Cabinet Secretary will also hold periodic video conferences with the Chief Secretaries to monitor these initiatives.

I also request you to highlight the action taken by the States for reinvigorating the economy so that we can deliberate on these interventions.

The stimulus measures by the Central Government had a cost in terms of deterioration of Centre's fiscal deficit which went up to 6.2 per cent of GDP in 2008-09. High levels of fiscal deficit are not sustainable in the medium to long term, both for the States and the Centre. We have to deliberate on ways and means to bring back the economy to higher growth trajectory without fiscal profligacy. We have to resume the process of fiscal consolidation at the earliest.

While doing so, our focus should be on "Aam Aadmi" i.e. the common man. We have to ensure that the growth process is not only accelerated but also inclusive. There are rising expectations among the citizen of our country and we have to live up to those expectations. We need to give full attention to sectors like infrastructure, agriculture, employment generation etc.

We also need to focus on the introduction of GST from 1st April 2010. This is a critical part of our economic reforms. I request all the Chief Ministers and Finance Ministers to resolve the pending issues expeditiously. As in the case of VAT, the Centre continues to play the role of a facilitator for GST also. I am happy to inform this august gathering that the request of the States for elimination of double counting of revenue benefits to the States for both the VAT and CST compensation packages, has been accepted by me and the related circulars have also been issued.

During today's deliberations, I request you to concentrate on macroeconomic issues which the country requires to address at this stage. I look forward to your valuable inputs during today's deliberations, which will help me in giving shape to the Union Budget 2009-10."