FRBM Act 2003
THE HANS INDIA |
Jan 17,2018 , 03:43 AM IST
The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is an Act of the Parliament of India to institutionalize financial discipline, reduce India's fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget and strengthen fiscal prudence.
The main purpose was to eliminate revenue deficit of the country (building revenue surplus thereafter) and bring down the fiscal deficit to a manageable three percent of the GDP by March 2008. However, due to the 2007 international financial crisis, the deadlines for the implementation of the targets in the act was initially postponed and subsequently suspended in 2009.
In 2011, given the process of ongoing recovery, Economic Advisory Council publicly advised the Government of India to reconsider reinstating the provisions of the FRBMA. N. K. Singh is currently the Chairman of the review committee for Fiscal Responsibility and Budget Management Act, 2003, under the Ministry of Finance (India), Government of India.
The main objectives of the act were: to introduce transparent fiscal management systems in the country; to introduce a more equitable and manageable distribution of the country's debts over the years; to aim for fiscal stability for India in the long run. Additionally, the act was expected to give necessary flexibility to Reserve Bank of India (RBI) for managing inflation in India.
Some quarters, including the subsequent Finance Minister P Chidambaram, criticised the act and its rules as adverse since it might require the government to cut back on social expenditure necessary to create productive assets and general uplift of rural poor of India.