frbm act - Budget 2018-19 has proposed amending the FRBM Act again, which will shift the target of 3% fiscal deficit-GDP ratio to end-March 2021.The FRBM Act is a fiscal sector legislation enacted by the government of India in 2003. This is an important topic for the IAS exam and is a part of the economy segment of the UPSC syllabus . Your email address will not be published. The FRBM Act, enacted in 2003 by Parliament aims to reduce India’s fiscal deficit and improve macroeconomic management. This terminology was innovated by the NK Singh Committee on FRBM. Aspirants can complement their reading with the following related articles: The latest information related to the FRBM Act for the 2019-20 Financial year is given below: This is an important topic in the UPSC exam and other government exams like banking, SSC, RRB, etc. The government believed the targets were too rigid. This ratio was 70% in 2017. I bought it and found it to be the best available online." The committee will also propose alterations for the time ahead. Revenue deficit to be eliminated by the 31st of March 2009. A new concept called Effective Revenue Deficit (E.R.D) was also introduced. No. Fiscal Deficit to be brought down to at least 3% of GDP by 31st of March 2008. What is the significance of FRBM with respect to Indian economy? However, the targets were not met. The FRBM Rules came into force from July 5, 2004. This article spoke about the FRBM Act, its provisions, and targets. Revenue Deficit, Primary Deficit, Effective Revenue Deficit. Dec 12, 2020 - FRBM Act 2003 Video | EduRev is made by best teachers of UPSC. Yes, I want ClearIAS to help me score high! In the year 2016, the NK Singh committee was set up by the government to review the FRBM Act. Since then, every Budget includes a Medium Term Fiscal Policy Statement that specifies the annual revenue and fiscal deficit goals over a three-year horizon. A minimum annual reduction of 0.5% of GDP. The FRBM Act seeks to achieve long-term macroeconomic stability, while generating budget surpluses, prudential debt management, limiting borrowings to cut down deficits and debt, greater transparency, removal of fiscal impediments and providing a medium-term framework for budgetary implementation. The Committee suggested using debt as the primary target for fiscal policy. A country is just like a house; if the expenditure is too much and if there is no revenue to balance the high expenditure, the country will eventually fall into a debt trap, which may finally result in its collapse. Indian Economy was weak as it had high Fiscal Deficit, high Revenue Deficit, and high Debt-to-GDP ratio. It is considered as one of the major legal steps taken in the direction of fiscal consolidation in India. The FRBM rules mandate four fiscal indicators to be projected in the medium-term fiscal policy statement. Fiscal deficit of 3.8% estimated in Revised Estimates (RE) 2019-20 and 3.5% for Budget Estimates (BE) 2020-21. The latest provisions of the FRBM act requires the government to limit the fiscal deficit to 3% of the GDP by March 31, 2021, and the debt of the central government to 40% of the GDP by 2024-25, among others. What is FRBM Act 2003? The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003 which set targets for the government to reduce fiscal deficits. Fiscal Responsibility and Budget Management (FRBM) Act enacted in 2003 by the Indian parliament aims at bringing financial discipline on government expenditure. Though the Act aims to achieve deficit reductions prima facie, an important objective is to achieve inter-generational equity in fiscal management. The FRBM Act was totally undemocratic in its approach as it denied freedom to future governments in respect of fiscal management. 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