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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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It required the Finance Minister of India to only conduct quarterly reviews of the receipts and expenditures of the Government and place these reports before the Parliament. Furthermore, he added that fiscal consolidation is indeed vital for India, as long as the needs of the poor citizens are not marginalised. It also laid down rules to prevent RBI from trading in the primary market for Government securities.

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. The government may be able to reduce revenue deficit by reducing subsidies.

It was reported that the Thirteenth Finance Commission of India was working on a new plan for reinstating fiscal management in India. In the Union Budget it was proposed 0213 constitute a Committee to review the implementation of the FRBM Act and give its recommendations on the way forward. Autonomous administrative divisions Cities Districts Municipalities States and territories.

Similarly, revenue deficit has to be reduced by 0.

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

The above features of Amended FRBM bill or Fiscal Responsibility and Budget Management Act clearly points out that the government intends to create a strong institutional mechanism to restore fiscal discipline at the level of the central government. It is a legal step to ensure fiscal discipline and fiscal consolidation in India.


ET EnergyWorld A one stop platform that caters to the pulse of the pulsating energy. Vide the Finance 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. The Finance Minister has to explain the reasons and suggest corrective actions to be taken, in case of breach.

Union budgets of India Vajpayee administration initiatives Indian business law Acts of the Parliament of India Economic history of India —present. Some quarters, including the subsequent Finance Minister Mr. The provisions of the bill impose restrictions on only the central government but state frbk are out of its scope.

To generate revenue surplus.

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

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.

These assumptions have been rejected by C. India portal Economics portal Government of India portal. After a fbrm start in the early nineties, the fiscal consolidation faltered after The task force proposed the following measures: However, wct to wct international financial crisisthe deadlines for the implementation of the targets in the act was initially postponed and subsequently suspended in The revenue deficit should be reduced to zero within a period of five years ending on March 31, The tenth plan of the Planning Commission of India highlighted the need for fiscal discipline at the level of the states.


This will help the government to meet specific situations like recessions which demand high government expenditure. The Standing Committee recommended that the numerical targets proposed in the Bill should be incorporated in the rules to be framed under the Act.

Fiscal deficit is not only the cause for higher inflation. The main objectives of the act were: However, other viewpoints insisted that the act would benefit the country by maintaining stable inflation rates which in turn would promote social progress.

The Finance Minister has to explain the reasons and suggest corrective actions to be taken, in case of breach. How FM tamed the deficit”. aft

Fiscal Responsibility and Budget Management Act, – Wikipedia

Tax revenue as percentage of GDP. There is also a suggestion that fiscal expansion or contraction should be aligned with credit contraction or expansion respectively, in the economy. However, it should be noted that strict adherence to the path of fiscal consolidation during pre crisis period created enough fiscal space for ffrbm counter cyclical fiscal policy.

The Government can move away from the path of fiscal consolidation only in case of natural calamity, national security and other exceptional grounds which Central Government may specify. FFC, taking into account the development needs and the current macro- economic requirement, provided additional headroom to a maximum of 0.