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This Act may be called the Fiscal Responsibility and Budget Management Act, .. G.S.R. (E), dated 7th May, , see Gazette of India. The FRBM Act is a fiscal sector legislation enacted by the government of India in , aiming to ensure fiscal discipline for the centre by. Responsibility and Budget Management (FRBM) Act. While the . FRBM Act, the fiscal deficit was to be reduced steadily to 3% of gross.

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Vijay Frvm for drawing up the medium term framework for fiscal policies to achieve the FRBM targets. Views Read View source View history. However, due to the international financial crisisthe deadlines for the implementation of the targets in the act was initially postponed and subsequently suspended in Controller of Publications, Government of India Press.

Fiscal Responsibility and Budget Management Act, – Wikipedia

This will help in reducing consumptive component of revenue deficit and create space for increased capital spending. Finally, the government did announce a path of fiscal consolidation starting from fiscal deficit of 6. But the benefit from high expenditure and debt today goes to the present generation.

If a State is not able to fully utilise its sanctioned fiscal deficit of 3 per cent of GSDP in any particular year during the to of FFC award period, it will have the option of availing this un-utilised fiscal deficit amount calculated in rupees only in the following year but within FFC award period.

Similarly the government wants to introduce greater transparency in fiscal operations of the central government. The third important feature of Amended FRBM bill or FRBM Act is that it clearly stated that the revenue deficit and fiscal deficit of the government may exceed the targets specified in the rules only at the grounds of national security or national calamity faced by the country.

Fiscal Responsibility and Budget Management FRBM Act

The revenue deficit should be reduced to zero within a period of five years ending on March 31, Meaning – What it Includes? The provisions of the bill impose restrictions on only the central government but state governments are out of its scope. An Act to provide for the responsibility of the Central Government to ensure inter — generational equity in fiscal management and long-term macro-economic stability by achieving sufficient revenue surplus and removing fiscal impediments in the effective conduct of monetary policy and prudential debt management consistent with fiscal sustainability through limits on the Central Government borrowings, debt and deficits, greater transparency in fiscal operations of the Central Government and conducting fiscal policy in a medium-term framework and adt matters connected therewith or incidental thereto.


In India we have managed to build large foreign exchange reserves, though fiscal deficit has not come down. The objective of the Act is to ensure inter-generational equity in fiscal management, long run macroeconomic stability, better coordination between fiscal and monetary policy, and transparency in fiscal operation of the Government. Allocation of greater portion of expenditure to legitimate public goods by revisiting the classification of expenditure.

Foul language Slanderous Inciting hatred against a certain community Others. These fiscal indicators are as follows: The residuary powers to make rules with respect to this act were with the Central Government [8] with subsequent presentation before the Parliament for ratification.

It was reported that the Thirteenth Finance Commission of India was working on a new plan for reinstating fiscal management in India. The medium term fiscal policy statement should project specifically for important fiscal indicators. Chandrashekhar and Jayanti Ghosh who have given the following arguments: The Government can vrbm away from the path of 213 consolidation only in case of natural calamity, national security and other exceptional grounds which Central Government may specify.

The Central Government, by rules made by it, was to specify the following: What is structural retrogression in Indian economy?

These primarily related to strengthening the institutional framework on fiscal matters as well as certain issues connected with new capital expenditures in the budget.

Financial Benchmarking in India. 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.

Larger fiscal deficit lead to higher inflation Larger fiscal deficit increase external vulnerability of the economy. Views Read Edit View history. Therefore, there is a need for fiscal responsibility legislation for the State Governments as well.

Total outstanding liabilities as percentage of GDP. Your Reason has been Reported to the admin.


The Finance Minister has to explain the reasons and suggest corrective actions to be taken, in case of breach. It gives the responsibility to the government to adhere to these targets.

Consequently, Economic reforms were introduced in and fiscal consolidation emerged as one of the key areas of reforms. Firstly, the bill highlighted the terrible state of government finances in India both at the Union and the state levels under the statement of objects and reasons.

What is Fiscal Responsibility and Budget Management (FRBM) Act? What are the amendments to it?

The central government at the time of presentation of the annual budget shall disclose the significant changes in accounting standards, policies and practices likely to affect the computation of fiscal indicators. The borrowing again produced high interest payments.

Furthermore, he added that fiscal consolidation is indeed vital for India, as long as the needs of the poor citizens are not marginalised. East North Northeast South West. The committee recommended that the government should target a fiscal deficit of 3 per cent of the GDP in years up to March 31, cut it to 2.

As a result of fiscal stimulus, the government has moved away from the path of fiscal consolidation. There should be progressive reduction of this limit by atleast one percentage point of GDP in each subsequent year.

This was after a widely held view among experts that instead of fixed fiscal deficit targets, it may be better to have a fiscal deficit range as the target. Since the act was primarily for the management of the governments’ behaviour, it provided for certain documents to be tabled in the parliament annually with regards to the country’s fiscal policy.

Newer Posts Older Posts Home. 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.

Amendments to the Act were made after its initial version in