"In a demonstration of close cooperation between the Centre and states, the states have introduced the broad-based value-added tax, replacing the earlier sales taxes. In the same vein, preparations have begun for the introduction of goods and services tax on April 1, 2010," he said.

"The GST would integrate central and state taxes on goods and services and would revolutionise indirect taxation in the country by eliminating the distorting features," the finance minister added.

Delivering the 10th convocation address of the University of Hyderabad here, he said the GST would also improve the efficiency of resource allocation, besides improving the competitive edge vis-a-vis our international competitors, who do not have overbearing taxation at two levels of government and whose burden of indirect taxes is not high as in India.

Stating that the country should not shy away from selecting leading sectors of growth and offering them encouragement, he said the government had in the past provided special dispensation to textiles and steel.

"Productive activity in both these sectors subsequently took off from a relatively slow or stable rate. Indirect taxes were also reduced significantly for small automobiles and that sector has done well enough for us to feel confident that India is on its way to becoming a hub for small cars," he said.

The country should continue to seek more such sectors that could contribute exceptionally to its growth rates, and where unutilised potential exists in terms of both resources and well-established skills.

Some promising sectors here are food processing, electronic hardware, leather products, hotels and tourism, he added.