New Delhi: The states must agree to reforms such as the Goods and Services Tax (GST), reduce their respective fiscal deficit and manage crucial resources such as energy and water better if they want to achieve inclusive growth, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said Saturday.
"Early implementation of the GST would make a major contribution. It would not only raise more revenue for both the centre and states, it would also create a single market in the country and remove distortions in indirect taxes," Ahluwalia told the 56th meeting of the National Development Council (NDC) here.
"How attractive the business and investment environment is in a state will determine much of the outcome in terms of the flow of investment to the state and the growth of both output and employment."
The implementation of GST has been held up because of opposition from some states, which fear the legislation would take away their fiscal autonomy.
The deputy chairman of the plan panel also made it clear to the attending chief ministers and their representative that they needed to bring down their fiscal deficit "since the debt position has become very difficult in many states."
The NDC is the highest decision-making body on matters pertaining to central and state finances and also approves Five Year Plans. This meeting is to discuss the approach to the Twelfth Five Year Plan (2012-13 to 2016-17).
The council, chaired by the prime minister, was attended by Planning Commission Deputy Chairman Montek Singh Ahluwalia, Finance Minister Pranab Mukherjee, Agriculture Minister Sharad Pawar, some key central ministers and chief ministers.
Ahluwalia also asked states to urgently address systemic deficiencies in managing agriculture, power and water resources.
"For example, it should not be difficult to exempt horticultural products entirely from the application of the APMC Act. However, this is yet to be done," said the plan panel deputy chief.
Referring to the staggering losses incurred by several state power distribution utilities on account of low pricing and transmission losses, Ahluwalia said: "The total losses of the distribution system, if properly accounted are probably as high as Rs.70,000 crore."
"If the states could cover these losses by subsidies, the system would not be at risk. However, state budgets cannot provide subsidies on this scale and the losses are effectively being funded by the banking system."