FRBM Act - Papertyari
FRBM Act - Papertyari
FRBM Act - Papertyari
Fiscal Responsibility and Budget Management Act (FRMB Act) was introduced in Parliament as the FRBM
Bill in December 2000. It seeks to foster fiscal discipline on the Central Government and achieving a
balanced budget with effective revenue management. The Act was passed on August 26, 2003,
therefore it is also called Fiscal Responsibility and Budget Management Act (FRBMA), 2003. FRBMA was
brought into effect from July 5, 2004.
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FRBM Act Exemptions
Section 4 of the FRBM Act, 2003 states that “due to ground or grounds of national security or national
calamity or such other exceptional grounds as the Central Government may specify”24, the set targets
for revenue and fiscal deficit can be exceeded
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1. The central government shall reduce the fiscal deficit by an amount equivalent to 0.1
percent or more of the gross domestic product at the end of each financial year
beginning with the financial year 2018-19, so that fiscal deficit is brought down to not
more than 3 percent of the GDP by 31st day of March, 2021
2. It proposed to bring down fiscal deficit to 3.3 percent, 3.1 percent and 3 percent of the
gross domestic product by 2018-19, 2019-20 and 2020-21
Fiscal Council: The Committee proposed to create an autonomous Fiscal Council with a
Chairperson and two members appointed by the centre. To maintain its independence, it
proposed a non-renewable four-year term for the Chairperson and members. Further, these
people should not be employees in the central or state governments at the time of
appointment.
The Committee suggested that grounds in which the government can deviate from the targets
of FRBM should be clearly specified, and the government should not be allowed to notify other
circumstances
Borrowings from the RBI: The draft Bill restricts the government from borrowing from the
Reserve Bank of India (RBI) except when: (i) the centre has to meet a temporary shortfall in
receipts, (ii) RBI subscribes to government securities to finance any deviations from the specified
targets, or (iii) RBI purchases government securities from the secondary market
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