HPAS/Allied Mains 2022 Answer Writing Challenge Day 188: Model Answer

QUESTION: What are main features of Fiscal Responsibility and Budget Management Act, 2003. (4 marks/60 words)

Answer:

The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, establishes financial discipline to reduce fiscal deficit.

The FRBM Act aims to introduce transparency in India’s fiscal management systems. The Act’s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India. The FRBM Act was enacted to introduce more equitable distribution of India’s debt over the years.

Main features of the FRBM Act

The FRBM Act made it mandatory for the government to place the following along with the Union Budget documents in Parliament annually:

1. Medium Term Fiscal Policy Statement
2. Macroeconomic Framework Statement
3. Fiscal Policy Strategy Statement

The FRBM Act proposed that revenue deficit, fiscal deficit, tax revenue and the total outstanding liabilities be projected as a percentage of gross domestic product (GDP) in the medium-term fiscal policy statement.