Click to play videoChandigarh: Get your finances right and stop making populist announcements. That was Prime Minister’s firm message to state governments.
At a conclave on Thursday, Manmohan Singh warned against announcing incentives that are not financially viable.
Though he did not mention special economic zones (SEZs), he spoke against fiscal benefits being promised to investors.
Singh asked 10 northern states to go slow on fiscal incentives to the industry. He criticised states which provided tax breaks and fiscal incentives for promoting industrial development.
"The jury is still out on whether these policies really promote industrial growth. In the excitement to have headline-grabbing MoUs, we offer incentives, both fiscal and financial, which our finances cannot sustain."
"What will pay off are policies which strengthen the human and physical resource capabilities of states," Singh said at a conclave of Chief Ministers organised by the PHDCCI.
"The largest barriers to trade have been our tax systems. I am told that free flow of trade can add up to 2 per cent to state growth rates across the region," Singh said.
He called for simplifying procedures, reducing controls and promoting greater coordination across states to facilitate rather than hinder movement of people and goods.
"States believe that by creating financial and physical barriers to trade with neighbours will increase development at home, but "these policies... will not pay off in the long run," he said.
He suggested that the northern region could cooperate in many areas to provide a superior resource and infrastructure base. They should establish cooperative mechanisms to manage their water resources. They could also cooperate in power sector to tide over the current 10 per cent shortage.
The Prime Minister asked the states to invest in human resources, so that their youth become productive agents. "India is increasingly a country of young people; the youthful population will provide the human resource and their savings for sustaining growth in the next 20 years." But he said that itself was not a guarantee for sustained growth.
"You have to invest in your people. While we in Delhi are providing a supportive policy environment, you will have to do much more to capitalise on the emerging knowledge economy," he
said.
Chief Ministers of Chhattisgarh, Madhya Pradesh and Rajasthan, Uttar Pradesh and Uttaranchal did not attend the conclave.
(For updates you can share with your friends, follow IBNLive on Facebook, Twitter, Google+ and Pinterest)
More on IBNLive Right Now
MOST SHARED
PHOTOGALLERY
