However, the Comptroller and Auditor General of India (CAG) pulled up the government for deferring the targets which it said should have been done through amending the Act. 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. to aim for fiscal stability for India in the long run. Every time when the Union Budget of India is presented, the term FRBM is seen in the news. In May 2016, the government set up a committee under NK Singh to review the FRBM Act. After much discussions, a watered-down version of the bill was passed in 2003 to become the FRBM Act. The clause allows the govt to relax the fiscal deficit target for up to 50 basis points or 0.5 per cent. In Budget 2017, Finance Minister Arun Jaitley deferred the fiscal deficit target of 3% of the GDP and chose a target of 3.2%, citing the NK Singh committee report. The requirement of Medium Term Expenditure Framework Statement was also added via amendment in FRBMA. Though the Act aims to achieve deficit reductions prima facie, an important objective is to achieve inter-generational equity in fiscal management. This bill was passed by the Indian Parliament in 2003 and came to be known as the Fiscal Responsibility and Budget Management Act. The targets were put off several times. Before we start the discussion of FRBM Act, you need to understand following terms: Disinvestment target of Rs. Fiscal deficit is when the governments expenditure outgrows its revenues. What is Fiscal responsibility and Budget Management (FRBM) Act? Total Debt to be reduced to 9% of the GDP (a target increased from the original 6% requirement in 200405). It is a relevant topic for the UPSC 2021 and falls under the topic Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment in General Studies Paper 3. Articles similar to FRBM Act are linked in the table below: Your email address will not be published. Required fields are marked *, "Working 24*7 in the police for the last 5 years and been out of touch with the preparation, I took the guidance from your website, especially the ClearIAS prelims test series. The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003 which set targets for the government to reduce fiscal deficits. In Budget 2017, Finance Minister Arun Jaitley deferred the fiscal deficit target of 3% of the GDP and chose a target of 3.2%, citing the NK Singh committee report. In 2018, the FRBM Act was further amended. Singh) submitted its report in January 2017. 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. The act also intended to give the required flexibility to the Central Bank for managing inflation in India. Fiscal Responsibility and Budget Management (FRBM) Act enacted in 2003 by the Indian parliament aims at bringing financial discipline on government expenditure. What exactly is FRBM? This included the Medium-term Fiscal Policy Statement, Fiscal Policy Strategy Statement, Macro-economic Framework Statement, and Medium-term Expenditure Framework Statement. A minimum annual reduction 0.3% of GDP. A trusted mentor and pioneer in online training, Alex's guidance, strategies, study-materials, and mock-exams have helped thousands of aspirants to become IAS, IPS, and IFS officers. Revenue deficit to be eliminated by the 31st of March 2009. The topic is important for IAS Exam, hence this article will be talking about the FRBM act in detail which will be useful for the civil services exam. As per the latest data, the following changes have been incorporated : Read the summary of Union Budget 2020 for an upcoming exam in the linked article. Yes, I want ClearIAS to help me score high! Hence in 2000, they introduced a bill to bring responsibility and discipline in matters of expenditure and debt. The FRBM Act is a law enacted by the Government of India in 2003 to ensure fiscal discipline by setting targets including reduction of fiscal deficits and elimination of revenue deficit. Background After the presentation of the Fiscal Responsibility and Budget Management (FRBM) Act in 2003 and the related FRBM Rules in 2004, the target fiscal deficit to GDP ratio of 3% for the Union government was achieved only once, in 2007-08, when it was 2.5%. In May 2016, the government set up a committee under NK Singh to review the FRBM Act. What is the full form of FRBM? 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. An annual reduction of 1% of GDP. The Interim budget for the Financial Year 2019-20 was presented on Feb 1, 2019, in the parliament. 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. 4 FRBM Act In order to deal with crisis created by COVID-19 pandemic, Kerala government announced a package of 20,000 crores and urged the centre to provide flexibility under the FRBM Act. Fiscal Responsibility and Budget Management (FRBM) Act. The minimum annual reduction target was 0.3% of GDP. The minimum annual reduction target was 0.3% of GDP. FRBM act UPSC On 1 February 2017, the finance minister offered the union budget in the parliament revealing that a committee would be started for the reconsideration of application of the Fiscal Responsibility and Budget Management Act (FRBM Act). 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