{"id":1269,"date":"2022-11-08T10:32:59","date_gmt":"2022-11-08T10:32:59","guid":{"rendered":"https:\/\/www.iasuniverse.com\/?p=1269"},"modified":"2022-11-08T10:33:00","modified_gmt":"2022-11-08T10:33:00","slug":"economy-simplified-fiscal-responsibility-and-budget-management-act-2003-frbma-explained","status":"publish","type":"post","link":"https:\/\/www.iasuniverse.com\/economy-simplified-fiscal-responsibility-and-budget-management-act-2003-frbma-explained\/","title":{"rendered":"Economy Simplified: Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) explained."},"content":{"rendered":"\n<h5 class=\"wp-block-heading\">In a multi-party parliamentary system, electoral concerns play an important role in determining expenditure policies. A legislative provision, it is argued, that is applicable to all governments \u2013 present and future \u2013 is likely to be effective in keeping deficits under control.<\/h5>\n\n\n\n<h5 class=\"wp-block-heading\"><strong>The enactment of the FRBMA, in August 2003, marked a turning point in fiscal reforms, binding the government through an institutional framework to pursue a prudent fiscal policy.<\/strong><\/h5>\n\n\n\n<h5 class=\"wp-block-heading\">The central government must <strong>ensure intergenerational equity and long-term macro-economic stability <\/strong>by achieving <strong>sufficient revenue surplus<\/strong>,<strong> removing fiscal obstacles to monetary policy<\/strong> and <strong>effective debt management by limiting deficits and borrowing.<\/strong><\/h5>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Main Features of the Act\u00a0<\/strong><\/h3>\n\n\n\n<h5 class=\"wp-block-heading\">1. The Act mandates the central government to take appropriate measures to<strong> reduce fiscal deficit to not more than three percent of GDP<\/strong> and<strong> to eliminate the revenue deficit<\/strong> by March 31, 2009 and thereafter build up adequate revenue surplus.<\/h5>\n\n\n\n<h5 class=\"wp-block-heading\">2. It requires the<strong> reduction in fiscal deficit <\/strong>by 0.3 percent of GDP each year and the revenue deficit by 0.5 per cent. If this is not achieved through <strong>tax revenues<\/strong>, the necessary adjustment has to come from a reduction in <strong>expenditure<\/strong>.<\/h5>\n\n\n\n<h5 class=\"wp-block-heading\">3. The actual <strong>deficits may exceed the targets <\/strong>specified only on grounds of <strong>national security or natural calamity <\/strong>or such other<strong> exceptional grounds<\/strong> as the central government may specify.<\/h5>\n\n\n\n<h5 class=\"wp-block-heading\">4. The central government shall <strong>not borrow from the Reserve Bank of India<\/strong> <strong>except by way of advances<\/strong> to meet temporary excess of cash disbursements over cash receipts.<\/h5>\n\n\n\n<h5 class=\"wp-block-heading\">5. The <strong>Reserve Bank of India must not subscribe to the primary issues<\/strong> of central government securities from the year 2006-07.<\/h5>\n\n\n\n<h5 class=\"wp-block-heading\">6. Measures to be taken to ensure greater transparency in fiscal operations.<\/h5>\n\n\n\n<h5 class=\"wp-block-heading\">7. The central government must lay before both Houses of Parliament <strong>three statements<\/strong> \u2013 <strong>Medium-term Fiscal Policy Statement<\/strong>, <strong>The Fiscal Policy Strategy Statement<\/strong>, <strong>The Macroeconomic Framework Statement<\/strong> along with the Annual Financial Statement.<\/h5>\n\n\n\n<h5 class=\"wp-block-heading\"><strong>8. Quarterly review<\/strong> of the trends in receipts and expenditure in relation to the budget be placed before both Houses of Parliament.<\/h5>\n","protected":false},"excerpt":{"rendered":"<p>The enactment of the FRBMA, in August 2003, marked a turning point in fiscal reforms, binding the government through an institutional framework to pursue a prudent fiscal policy.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[65],"tags":[62,64,32],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - 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