FRBM Act

by

The following are the subtopics of the FRBM Act:

  • Introduction
  • Objectives
  • Scope
  • Definitions
  • Fiscal Responsibility
  • Debt Management
  • Transparency and Accountability
  • Reporting and Monitoring
  • Enforcement
  • Transitional Provisions
  • Repeal and SavingsSavings
  • Amendments
  • Schedules
  • Act
    The Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) is an Act of the Parliament of India that was enacted to establish a framework for fiscal responsibility and budget management in the country. The Act was enacted in response to the growing Fiscal Deficit and debt burden of the Indian government.

The FRBM Act sets out a number of objectives, including:

  • To reduce the fiscal deficit to 3% of GDP by 2008-09;
  • To eliminate Revenue Deficit by 2008-09;
  • To maintain a debt-GDP ratio of 40% or below;
  • To promote transparency and accountability in fiscal management;
  • To strengthen the institutional framework for fiscal management.

The FRBM Act also sets out a number of measures to achieve these objectives, including:

  • A medium-term Fiscal Policy framework;
  • A debt management strategy;
  • A fiscal responsibility rules;
  • A transparency and accountability framework;
  • A reporting and monitoring framework;
  • An enforcement mechanism.

The FRBM Act has been successful in achieving some of its objectives. The fiscal deficit has been reduced from 6.5% of GDP in 2003-04 to 3.5% of GDP in 2017-18. The revenue deficit has also been eliminated. However, the debt-GDP ratio has increased from 40% in 2003-04 to 48% in 2017-18.

The FRBM Act has also been successful in promoting transparency and accountability in fiscal management. The government has been publishing a medium-term fiscal policy statement, a debt management report, and a fiscal responsibility report every year. The government has also been publishing a report on the implementation of the FRBM Act every year.

The FRBM Act has also been successful in strengthening the institutional framework for fiscal management. The government has set up a Fiscal Responsibility Council and a Debt Management Office to oversee the implementation of the FRBM Act.

The FRBM Act has been a landmark legislation in the history of fiscal management in India. It has helped to improve the fiscal health of the country and has promoted transparency and accountability in fiscal management. However, there are some challenges that need to be addressed in order to make the FRBM Act more effective. These challenges include:

  • The need to reduce the fiscal deficit further;
  • The need to eliminate the revenue deficit;
  • The need to reduce the debt-GDP ratio;
  • The need to strengthen the institutional framework for fiscal management;
  • The need to improve the implementation of the FRBM Act.

Despite these challenges, the FRBM Act has been a success story. It has helped to improve the fiscal health of the country and has promoted transparency and accountability in fiscal management. The government needs to address the challenges that need to be addressed in order to make the FRBM Act more effective.
Introduction

The Fiscal Responsibility and Budget Management Act (FRBM Act) is an Act of the Parliament of India enacted in 2003. The Act was enacted with the objective of ensuring fiscal discipline and transparency in the management of public finances. The Act sets out a framework for fiscal management, including targets for fiscal deficit and debt, and procedures for reporting and monitoring fiscal performance.

Objectives

The objectives of the FRBM Act are to:

  • Ensure fiscal discipline and transparency in the management of public finances;
  • Promote macroeconomic stability;
  • Reduce the fiscal deficit and debt burden;
  • Improve the quality of public expenditure; and
  • Promote Sustainable Development.

Scope

The FRBM Act applies to the Central Government and all State Governments. The Act also applies to local bodies, public sector enterprises, and other bodies that are financed by the Central Government or State Governments.

Definitions

The FRBM Act defines a number of terms, including:

  • Fiscal deficit: The difference between the total expenditure of the government and its total revenue.
  • Primary Deficit: The difference between the fiscal deficit and the interest payments of the government.
  • Debt: The total outstanding liabilities of the government, including both internal and External Debt.
  • Fiscal responsibility: The objective of ensuring that the government’s fiscal deficit and debt do not exceed certain limits.
  • Transparency: The objective of ensuring that the government’s fiscal performance is open and accountable to the public.

Fiscal Responsibility

The FRBM Act sets out a number of targets for fiscal deficit and debt. The Act also sets out procedures for reporting and monitoring fiscal performance.

The Act requires the Central Government to maintain a fiscal deficit of not more than 3% of GDP. The Act also requires the Central Government to maintain a primary deficit of not more than 0.5% of GDP. The Act requires the State Governments to maintain a fiscal deficit of not more than 3% of GSDP. The Act also requires the State Governments to maintain a primary deficit of not more than 0.5% of GSDP.

The Act requires the Central Government and State Governments to report their fiscal performance to Parliament and State Legislatures, respectively. The Act also requires the Central Government and State Governments to publish their fiscal performance on their websites.

Debt Management

The FRBM Act sets out a number of principles for debt management. The Act also sets out procedures for reporting and monitoring debt management.

The Act requires the Central Government to manage its debt in a prudent and sustainable manner. The Act also requires the Central Government to ensure that its debt is diversified and that its maturity profile is appropriate. The Act requires the State Governments to manage their debt in a prudent and sustainable manner. The Act also requires the State Governments to ensure that their debt is diversified and that their maturity profile is appropriate.

Transparency and Accountability

The FRBM Act requires the Central Government and State Governments to be transparent in their fiscal management. The Act also requires the Central Government and State Governments to be accountable to the public for their fiscal performance.

The Act requires the Central Government and State Governments to publish their fiscal performance on their websites. The Act also requires the Central Government and State Governments to hold public consultations on their fiscal policies.

Reporting and Monitoring

The FRBM Act requires the Central Government and State Governments to report their fiscal performance to Parliament and State Legislatures, respectively. The Act also requires the Central Government and State Governments to publish their fiscal performance on their websites.

The Act requires the Central Government and State Governments to establish independent fiscal councils to monitor their fiscal performance.

Enforcement

The FRBM Act provides for a number of enforcement mechanisms, including:

  • The Central Government may issue directions to the State Governments to comply with the Act.
  • The Central Government may impose financial penalties on the State Governments for non-compliance with the Act.
  • The Central Government may refer the matter to the Supreme Court for enforcement of the Act.

Transitional Provisions

The FRBM Act provides for a number of transitional provisions, including:

  • The Act applies to the financial year 2004-05 and subsequent financial years.
  • The Central Government and State Governments may take steps to comply with the Act before the financial year 2004-05.
  • The Central Government may make rules to implement the Act.

Repeal and Savings

The FRBM Act repeals the following Acts:

  • The Fiscal Responsibility and Budget Management Act, 2000.
  • The Fiscal Responsibility and Budget Management (Amendment) Act, 2002.

The FRBM Act saves the following Acts:

  • The Constitution of India.
  • The Reserve Bank of India Act,

  • The FRBM Act was enacted in the year:
    (a) 2000
    (b) 2001
    (CC) 2002
    (d) 2003

  • The FRBM Act was enacted with the objective of:
    (a) ensuring macroeconomic stability
    (b) promoting growth
    (c) reducing fiscal deficit
    (d) all of the above

  • The FRBM Act covers the following areas:
    (a) fiscal responsibility
    (b) debt management
    (c) transparency and accountability
    (d) all of the above

  • The FRBM Act sets out the following fiscal targets:
    (a) fiscal deficit
    (b) revenue deficit
    (c) primary deficit
    (d) all of the above

  • The FRBM Act requires the government to:
    (a) publish a medium-term fiscal policy statement
    (b) present a revised estimate of the budget
    (c) present an annual report on the implementation of the FRBM Act
    (d) all of the above

  • The FRBM Act is enforced by the:
    (a) Finance Ministry
    (b) Reserve Bank of India
    (c) Comptroller and Auditor General of India
    (d) all of the above

  • The FRBM Act has been amended in the year:
    (a) 2004
    (b) 2005
    (c) 2006
    (d) 2007

  • The FRBM Act has been amended to:
    (a) reduce the fiscal deficit target
    (b) increase the revenue deficit target
    (c) reduce the primary deficit target
    (d) all of the above

  • The FRBM Act has been successful in:
    (a) ensuring macroeconomic stability
    (b) promoting growth
    (c) reducing fiscal deficit
    (d) all of the above

  • The FRBM Act has been criticized for:
    (a) being too rigid
    (b) being too complex
    (c) being too ambitious
    (d) all of the above