Jaitley was responding to a statement by senior Congress leader and former home minister P Chidambaram who said when people of Jammu and Kashmir ask for "azadi", most of them mean they want greater autonomy.
"The position that the Congress has taken with regard to azadi or autonomy for Jammu and Kashmir goes directly contrary to India's national interest.
"It was the flawed policy of the Congress right since 1947 which is responsible for the Kashmir problem," Jaitley told reporters here.
"I think the Congress is deceiving the whole country, it is deceiving itself and it is encouraging separatism in J&K. It is hurting India's national interest and this is a very serious issue," he said.
More From This Section
Dubbing10 years of the UPA Government as a "wasted opportunity on J&K", Jaitley said "not a single initiative worked and you had a mass civil disobedience in terms of stone throwing agitation, you had terrorism and terrorists on top, you had normal life being disturbed.
"We have succeeded in squeezing the funds for terrorists. The mass protest of stone throwers are by and large over. Intelligence network from village to village has been reestablished, terrorists are on the run and security forces have the upper hand," he said.
He also asked the Congress to make it clear if Chidambaram's statement is the official stand of the party.
On the Congress's view on demonetisation, Jaitley said "the party never had fighting black money on their agenda and therefore, all anti-black money steps that the NDA government has taken are something which disturbed the Congress.