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In its report submitted in January 2017, titled, ‘The Committee in its Responsible Growth: A Debt and Fiscal Framework for 21st Century India’, the Committee suggested that a rule based fiscal policy by limiting government debt, fiscal … The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003 which set targets for the government to reduce fiscal deficits. Adopt the 3 Strategies for Success in the UPSC Civil Services Exam. The FRBM Rules came into force from July 5, 2004. Revenue Deficit Target – revenue deficit should be completely eliminated by March 31, 2015. Finance Minister deferred the fiscal deficit target of 3.2% due to several factors such as low GST collections, spike in oil prices and pressure to spend more. (Understand what. 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. What is Fiscal responsibility and Budget Management (FRBM) Act? An annual reduction of – 1% of GDP. to aim for fiscal stability for India in the long run. Fiscal Deficit Target – fiscal deficit should be reduced to 3% of GDP by March 31, 2018. The FRBM Act was amended twice, in 2012 and 2015. … Continue reading FRBM : Analysis The rule specifies reduction of fiscal deficit to 3% of the GDP by 2008-09 with annual reduction target of 0.3% of GDP per year by the Central government. 3. 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. In 2018, the FRBM Act was further amended. What is FRBM Act? As seen in the above analysis, different governments have failed to achieve the FRBM targets set to be achieved in 2008 even by 2020. Total Debt to be reduced to 9% of the GDP (a target increased from the original 6% requirement in 2004–05). The intention of the Fiscal Responsibility and Budget Management Act was to bring –. Under FRBM, if the escape clause is triggered to allow for a breach of fiscal deficit target, the RBI is then allowed to participate directly in the primary auction of government bonds, thus formalising deficit financing. Critical Analysis of the FRBM Act The act was passed to make the central government and finance minister accountable to parliament for fiscal discipline. Fiscal deficit is when the government’s expenditure outgrows its revenues. An annual reduction of – 1% of GDP. A minimum annual reduction – 0.3% of GDP. 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