Jaitley's remarks, in a keynote address to the India Conference at the prestigious University of California at Berkeley, came less than a month after Congress Vice President Rahul Gandhi addressed the students there.
In response to a question, Gandhi had said that dynastic politics was a "problem" in India, but maintained that a large number of people in his party did not have a dynastic background.
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In his speech at Berkeley, Gandhi had also slammed the politics of polarisation.
The Union Finance Minister is scheduled to arrive on nearly a week-long visit to the US tomorrow to interact with the US corporate world in New York and Boston and attend the annual meeting of International Monetary Fund and World Bank in Washington DC.
Responding to questions after delivering his keynote address via video conference, Jaitley said Congress party which ruled the country for decades is out of sync with the ground realities and aspirations of India as it exists now.
The main challenge before the Congress party is two fold, he said.
Historically and conventionally, the Congress occupied the centre space in India, the BJP leader said.
They consistently did it through decades and that's how they were the natural party of governance, he observed.
"In the last few years, if I may say so, this process started in 2004 with the establishment of National Advisory Council and has continued, and today I find that the position that they take on most issues is not the conventional Congress party's centrist positions," he noted.
"There are ideological agenda that are dictated by the ultra-left and they (Congress) end up being the cheerleaders as far as that is concerned," Jaitley said as he went on to take a dig at the leadership of the Congress party itself.
"Secondly the party's whole process of leadership creation within the party based on talent and potential and quality of an individual does not just gel with the rest of aspirational India," he said.
"Aspirational India tests its leaders very harshly.
It is willing to impose a tough criterion on the leadership itself. It is no longer in a mood that it will accept family names or other such marks in order to decide who are the better leaders," he said.
"So, unless it can go back to being a more structured party which selects its leaders based on calibre and potential and goes back to its original centrist position I do not think it will be able to substantially expand its position," Jaitley said.
Disputing the description of a Berkley questioner on rising communal and social tension in the country, Jaitley said India in the past has had a whole legacy of social tension.
"You have seen social tension, religious tension. I think we are passing through a phase where India is gradually emerging out of it.
What happens is some stray incidents, unfortunate and condemnable. But stray incidents take place even in the United States," said the Union Finance Minister.
"It (such tensions and incidents disrupting societal harmony) takes place more in the United States than in India.
"It is just that propagandist in India has a bigger voice in trying to proclaim it all over the world," Jaitley said.
India is a far more peaceful place and therefore is the right place to do business, he said.