Under the Fiscal Responsibility and Budget Management Act (FRBMA) , both the Centre and States were supposed to wipe out revenue. The Fiscal Responsibility and Budget Management Act, (FRBM Act) is an act of Indian Parliament to institutionalize financial discipline. Fiscal Responsibility and Budget Management (FRBM) became an Act in The objective of the Act is to ensure inter-generational equity in.

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Increasing non-tax revenue requires that public sector services be appropriately priced, which may be difficult as the present society has got used to the subsidised education, health, food items, etc.

Fiscal Responsibility and Budget Management FRBM Act

However, it should be noted that strict adherence to the path of fiscal consolidation during pre crisis period created enough fiscal space for pursuing counter cyclical fiscal policy. Controller of Publications, Government of India Press.

A revenue surplus of 0. The large borrowings of the government led to such a precarious situation that government was unable to pay even for two weeks of imports resulting in economic crisis of Never febm a great news story! Implementing the act, the government had managed to cut the fiscal deficit to 2.

However due to the international crisisthe deadlines for the implementation of the targets in the act was initially postponed.

Government of India was on the path of achieving this objective right in time. However the central government may borrow from R. But, deficits of state governments are as much or even a greater problem.

While remaining committed to fiscal prudence and consolidation, Budget stated that a time has come to review the working of the FRBM Act, especially in the context of the uncertainty and volatility which have become the new norms of global economy.


The government believed the targets were too rigid. In Budgetthe government is not likely to meet its fiscal deficit target of 3. The Government of India had set up a review committee to evaluate the FRBM Act, [5] in order to assess its functionality in the last 12 years.

Taking into account the recommendations of the Standing Committee, a revised Bill was introduced in April The revenue deficit should be reduced to zero within a period of five years ending on March 31, How FM tamed the deficit”. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending. One of the major ommission of amended FRBM Bill or FRBM Act was complete absence of any 20003 for time bound minimum improvement in areas of power generation, transport, etc.

Though the Fiscal Responsibility and Budget Management Act or Amended FRBM bill is a credible effort by the government to fix responsibility on the government to reduce fiscal deficit and bring transparency in fiscal operations of the government it has certain limitations. Furthermore, he added drbm fiscal consolidation is indeed vital for India, as long as the needs of the poor citizens are not marginalised.

Fiscal Responsibility and Budget Management Act, – Wikipedia

With the Xct Actthe target dates for achieving the prescribed rates of effective deficit and fiscal deficit were further extended. Income tax exemption limit to be increased to Rs. This will alert our moderators to take action Name Reason for reporting: FRBM Act provides a legal institutional framework for fiscal consolidation. Will be displayed Will not be displayed Will be displayed.


FRBM Act 2003

Vijay Kelkar for drawing up the medium term framework for fiscal policies to achieve the FRBM targets. National security, natural calamity or other exceptional grounds that the Central Government may specify were cited as reasons for not implementing the targets for fiscal management principles, prohibition on borrowings from RBI and fiscal indicators highlighted above, provided they were approved by both the Houses of the Parliament as soon as possible, once these targets had been exceeded.

My Saved Articles Sign in Sign up. The Amended FRBM Bill or FRBM Act despite above criticism can play a very important role in controlling fiscal deficit and in bringing transparency in fiscal operation of the government if it is implemented effectively in letter and spirit by the concerned government.

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Fiscal Responsibility and Budget Management Act (FRBMA)

In this Bill numerical targets for various fiscal indicators were specified. Allocation of greater portion of expenditure to legitimate public goods by revisiting the classification of expenditure. Concerned over the worsening of fiscal situation, inthe Government of India had set up a committee to recommend draft legislation for fiscal responsibility.

But, deficits of state governments are as much or even a greater problem.