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The committee recommended that the government should target a fiscal deficit of 3 per cent of the GDP in years up to March 31, 2020, cut it to 2.8 per cent in 2020-21 and to 2.5 per cent by 2023. 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 minimum annual reduction target was 0.5% of GDP. Fiscal Deficit to be brought down to at least 3% of GDP by 31st of March 2008. Since there is a plethora of information on this subject, candidates should keep a note of all the points and material they have on this subject neatly classified. They advised legal steps to prevent India to fall into a debt-trap. The Committee proposed a draft Debt Management and Fiscal Responsibility Bill, 2017 to replace the Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act). Though the Act aims to achieve deficit reductions prima facie, an important objective is to achieve inter-generational equity in fiscal management. A minimum annual reduction – 0.3% of GDP. Hence in 2000, they introduced a bill to bring responsibility and discipline in matters of expenditure and debt. 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 central government agreed to the following fiscal indicators and targets, subsequent to the enactment of the FRBMA 1. The recommendations of the committee read that the government must target a fiscal deficit of 3 percent of the GDP in years up to March 31, 2020, subsequently cut it to 2.8 percent in 2020-21 and 2.5 percent by 2023. An annual reduction of – 1% of GDP. Follow ClearIAS timetable, study plan, and book-list. 3. Despite all its shortcomings the FRBM act rightly emphasised upon the value of prudent fiscal management, there were amendments in the act earlier and now the FRBM Review committee has made some welcome changes. Much of the borrowing was utilized for interest payments of previous borrowings, but not for productive-purposes. 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. A new concept called Effective Revenue Deficit (E.R.D) was also introduced. total outstanding liabilities as a percentage of GDP. 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. It is considered as one of the major legal steps taken in the direction of fiscal consolidation in India. The Fiscal Responsibility and Budget Management Bill (FRBM Bill) was introduced in India by the then Finance Minister of India, Mr.Yashwant Sinha in December 2000. This article spoke about the FRBM Act, its provisions, and targets. What is the significance of FRBM with respect to Indian economy? Alex Andrews George is a mentor, author, and entrepreneur. In 2019-20, total expenditure rises by 13.30% over 2018-19 RE. Fiscal deficit is when the government’s expenditure outgrows its revenues. FRBM became an Act in 2003 which provides a legal-institutional framework for fiscal consolidation. transparency in the fiscal operation of the Government. Total Debt to be reduced to 9% of the GDP (a target increased from the original 6% requirement in 2004–05). efficient management of expenditure, revenue and debt. This included the Medium-term Fiscal Policy Statement, Fiscal Policy Strategy Statement, Macro-economic Framework Statement, and Medium-term Expenditure Framework Statement. For details check the details of the budget documents. 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. The primary objective was the elimination of revenue deficit and bringing down the fiscal deficit. If there is no fiscal discipline, the government (executive) may spend as it wishes. Changes to the central government and finance Minister revised the fiscal ( FY 2019-20 ) year the were... And escape clause provided under the FRBM Act was expected to give the required to. Situation under which the central government can flexibly follow fiscal deficit to be projected in Medium-term... For welfare of SCs, 28 % for STs mentor, author and! Management systems in the year 2003 50 basis points or 0.5 per cent was passed the! 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