``Unless concerted steps are taken, the nation will not be able to move forward," Sinha said. "Tax reforms are an essential part of this problem-solving approach."

The fiscal deficit of state and central governments, combined with losses of state-run firms, was about eight per cent of gross domestic product (GDP) in 1998/99 (April-March). The government aims to rein the central fiscal deficit at 4.0 per cent of GDP in 1999/2000, down from 4.5 per cent in the previous year.

Economists doubt its ability to stick to the target because of unanticipated expenditure incurred on account of a 10-week clash earlier this year with armed intruders in the Kargil heights in Kashmir,combined with expenses towards a general election in September and October. The costs of rehabilitating millions of homeless people and rebuilding infrastructure in the eastern state of Orissa, ravaged by a severe cyclone in late October, is expected to dent fiscal calculations further.

Sinha earlier asked state chief ministers to agree on a time frame for introduction of value added tax (VAT) to do away with various stages of taxes in production process and dispensing with tax incentive schemes that were hurting the state finances badly. Sinha also asked the chief ministers to work on a strategy for implementing the recommendations of the committee of chief ministers, which among other things, calls for rationalisation of central and state sales tax and uniform floor rates of sales-tax by states and Union territories.

According to sources, the chief ministers at today's meeting by and large agreed on the formula of the committee headed by West Bengal chief minister Jyoti Basu. The decision on setting upof the committee was taken at last year's meeting of state chief ministers and finance ministers for suggesting ways and measures to streamline the tax structure. Madhya Pradesh chief minister Digvijay Singh and Goa chief minister Luizinho Falerio told PTI that they were in favour of convening an all party meeting consisting of senior party leaders, the chief ministers and the think tank of various parties to decide on the sales tax structure.

Himachal Pradesh chief minister said convening of such a meeting would help in arriving at a national consensus for sorting out the irritants that could come in the way of implementation of the VAT and uniform sales tax structure.The chief ministers were critical of the way the Fifth Pay Commission for central government employees were implemented and said this had left the state finances in a precarious position. Rajasthan chief minister Ashok Gehlot said the combined fiscal deficit of 24 states has jumped from 2.8 per cent of GDP in 1997-98 to 4.3 per cent in1998-99.

Goa chief minister in his address said states had started competing with each other to attract industries in order to give a head start in the race to develop the economy of the states. He also said the Fifth Pay Commission had put a strain on the resources of the states. Dhumal said he would welcome creation of some special fund by the centre to help states overcome the problems due to the implementation of the commission recommendation.

Digvijay Singh said he had urged upon the centre to enhance the state revenue to 29 per cent of the central taxes with effect from January 1996. He said the state government stood committed to implement VAT from April 1, 2001.

NEW DELHI, NOV 16: Reserve Bank governor Bimal Jalan said on Tuesday that the country's medium-term economic outlook was much better than expected, but warned against getting complacent. Speaking at a seminar on "Mid-Term Review of Indian Economy" organised by Assocham here on Tuesday, Jalan said "the medium-term economic outlookis much better than any one expected."

Jalan said gross domestic product was expected to grow at 6 to 6.5% in 1999-2000. "Things look good. Macro economic indicators are quite good. Better than we expected." However, Jalan warned against getting complacent because of the positive outlook. "I rejoice at what is happening but we should not be complacent and undertake an agenda for the future."Jalan also stressed on the need to create new financial intermediaries to give a fillip to financial sector reforms. There was a need to develop market on the basis of good institutions for achieving high growth rate.

He said RBI was working on creating new institutions in the financial sector for financial intermediation. "We need new financial intermediaries We will accomplish it over a period of time," the RBI governor said.Jalan said that when things are good it is time to undertake some basic reform measures. "We now have a window of opportunity as the economic circumstances are ripe. We are not fire fighting anymore," he said. This really is the time for action on basic issues, he said.

Pointing out that there was a long agenda on reforms, he said that government would immediately get on with issues where there was a wide consensus. He said that there were a number of areas where there was no difference of opinion which can make a material change in the life of people.He identified public administration, legislative and judicial and institutional reforms as areas where there was need to take steps quickly.

On the strategy to be followed, RBI governor said there was no "golden rule of management". "Golden rule have to be evolved by us. It has to be evolved by us. We have to realise our mistakes and correct it," he added.It is the result on the ground which matters and not the philosophy, said Jalan. He said the outcome of Indian economic reforms would have been different if the country had carried on a pre-determined path. Warning against complacency, Jalan said that crisis can happen to the best of the economiesand it will be a mistake not to attend to fundamental issues.

Earlier speaking at the seminar, N K Singh, secretary in the Prime Minister's office, said though there was a consensus in the country on reforms on principles, there was a wide divergence on implementation strategy of reforms. "Every body agrees on disinvestment but there is a total lack of consensus on the method of disinvestment," he said. Stating that enormous work rested on consensus, he asked the industry chambers to evolve a national consensus on implementation strategy of reforms.

Singh said for the fiscal deficit situation to improve, there would have to be better management of expenditure, revenues, disinvestment and state finances.He said India's tax-GDP ratio came down in the six years since liberalisation, while it has gone by 1.5 to 2 percentage points in most other countries. Likewise the finances of north eastern and some Hindi speaking states were in a precarious position, he said adding that unless these issues were addressedit was difficult to rectify the fiscal situation.

Underscoring the importance of efficiency, the RBI governor said centre, which makes all capital expenditure through borrowings, pays Rs 20,000 crore as interest while the earning from these investments was only about Rs 11,000 crore.