"Long inflationary trends have adversely impacted the food and nutritional security of the common man. We are committed to breaking this vicious cycle of high inflation and high interest rates," he said during a pre-Budget meeting with state finance ministers.
He further said that slowdown in economic growth coupled with high inflationary pressure poses a challenge to the country's economy, which has crawled at sub 5 per cent in the recent years.
"...there have been states registering much robust growth. This is clearly a case of sum being less than its parts and needs to be addressed through our concerted efforts.
"Mandate of 2014 clearly spells out that economic growth cannot be compromised at any cost and is sine qua non to reap the benefits of the demographic dividend," Arun Jaitley said.
He also sought states' support in tackling temporary fluctuation in prices.
"We also would like to evolve a mechanism which addresses the structural issues that create supply bottlenecks. We need to look at the Essential Commodities act and put in place strict measures and special courts to stop hoarding and black marketing," he said.
He said the need for a Single Agriculture Market and real time information dissemination on prices to farmers and consumers are areas which need to be addressed.
As part of the economic integration, he further said Goods and Services Tax (GST) is one pending issue, on which now consensus needs to be built and "implementation done at an early date".
"Implementation of GST has the potential to significantly improve the growth story...there are some vexatious issues which only need resolution. I wish and hope that these will be sorted out sooner than later," he said.
Earlier in the day, President Pranab Mukherjee said curbing food inflation was topmost priority of the Narendra Modi-led government at the Centre.
Arun Jaitley, who is holding pre-Budget meetings with different stake holders, said it is the policy of the new government that "Team India" will not be limited to the government sitting in Delhi but will also include states as equal partners in the growth.
"Discussions held today will be of immense help to the government in giving contours to the Budget proposals to be presented before the Parliament," he said.
Referring to recent data, he said the manufacturing sector has had an abysmal performance last year and the investment cycle has been disturbed.
"The negative sentiment has affected trade, hotels and transportation sectors which are posed for a slower growth compared to last year," Jaitley said.
The slow-down in economic growth coupled with high inflationary pressure, he said poses a challenge to the macroeconomic environment.
He said tax collections are only at 10 per cent of the GDP compared to the initial budget estimates of 10.9 per cent.
"India can ill afford this trend and I believe that deliberation held today will be the first of the series of such deliberations and we will together steer the economy in the mutually agreed direction," he added.
Jaitley further said his Government is committed to evolving a model of National Development which is driven by the States and "we intend to extend necessary flexibility to States in achieving this. I urge the States to be fiscally responsible with this greater devolution of power".
On National Food Security Act, he said the need of the hour is to implement the law in a cost effective and efficient manner for ensuring real "Food Security".
He also stressed on importance of effective PDS as a vehicle to shield the poor from price rise and restructuring Food Corporation of India for greater efficiency in delivering food grains.
Jaitley said decentralised procurement of food grains provides an alternative and more effective model for food grain administration.
He further said said government believe that growth can be revived through increased investment in the areas of Infrastructure.
"We have to think big and build an infrastructure which can cater to a growing population in coming years. Growth of infrastructure will also pull out sectors such as cement, steel and power etc from the current downturn and will lead to massive job creation," he told state finance ministers.
"You will appreciate that this cannot be achieved alone by the Central Government without partnering with the states. Similar approach is also required to modernise our Industries. We should no longer remain a market for global industry rather we should become a global manufacturing hub," Jaitley added.
He further said India has now reached a stage where demographic dividend will be bereft of any meaning unless "we improve access and quality of education and health services for teeming masses".
"We believe that not only access but there has to be a quantum jump in the quality of education and health services at affordable costs. I seek your support in achieving the objective of, quality education for all and assurance of health care for all," he said.
On centrally sponsored schemes, Jaitley said that with a view to grant greater autonomy to States in scheme implementation it was decided that funds for such schemes will be routed through the State Governments.
"Flexifunds" as part of this decision also exist to tailor the scheme implementation to meet the local requirements.
"I urge all of you to use this forum for making suggestions for improving implementation of various welfare programmes of the Government," Jaitley said.