He also said the government will amend the tough land acquisition law even if the opposition does not support as it looks to restore confidence in the economy.
At the same time, the Minister expressed hope that the Insurance Bill, seeking to raise foreign direct investment cap in the sector to 49 per cent from existing 26 per cent, will be passed in the upcoming winter session of Parliament.
Stating that Indian economy is facing challenges, he said, "So, a reasonable and rational tax policy (is needed). It can't be ultra aggressive with the tax payers."
Noting that India is not a high tax country, Jaitley said the tax Department at present is following the principle that those who have to pay tax must pay and those who don't have to pay should not be harassed for non-payment.
"We have realised that one of the greatest challenges we have is the manufacturing sector. The economy had touched a new low and therefore the manufacturing sector is itself is delicately poised in India. We have to eventually try and make India a hub of low-cost manufacturing," he added.
As far as the Land Acquisition Act is concerned, Jaitley said: "Some changes may be necessary. We will first try to reach a consensus and if that is not possible we will go ahead and take the decision."
The Land Acquisition Bill, which was passed during the previous UPA regime with then opposition BJP supporting it, seeks to set a fair compensation for farm land being taken over for industrial projects.
But the law has made land acquisition very difficult, slowing projects. Jaitley said that the "obstacles" to the land laws would have to be first removed in order to implement the concept of smart cities in India.