FRBM Act: The Fiscal Responsibility and Budget Management Act
FRBM Act: The Fiscal Responsibility and Budget Management Act
FRBM Act: The Fiscal Responsibility and Budget Management Act
FLOW OF PRESENTATION
What is Fiscal POLICY? Fiscal policy, refers to government policy that attempts to influence the direction of the economy . Fiscal policy can be contrasted with the other main types of macroeconomic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the supply of money.
Passed in 2003
Why FRBM ?
FRBM was introduced by Mr.Yashwant Sinha It was enacted by the Parliament of India FRBM was enacted to institutionalise financial discipline, reduce India's fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget. The main purpose was to eliminate revenue deficit of the country and bring down the fiscal deficit to a manageable 3% of the GDP by March 2008. And due to the 2007 international financial crisis, the deadlines for the implementation of the targets in the Frbm act was initially postponed and subsequently suspended in 2009.
Objectives of FRBM
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 Reduce the possible progressive reduction of Capital A/C liabilities Improve in the areas of fiscal transparency and to make it available to any public domain Improve Fiscal Planning and Budget Management Disaggregated analysis of administrative expenditure
The tenth plan of the Planning Commission of India highlighted the need for fiscal discipline at even the level of the states This was to reduce the debt-to-GDP ratio of India By 2007, the states like Karnataka, Kerala, Punjab, Tamil Nadu, Maharashtra and Uttar Pradesh are among those which have already legislated the required fiscal discipline laws at the state level
Criticism
No Target for Fiscal Deficit - Change through notification Fiscal Expansion and not contraction is important for growth No consideration for business cycles Unrealistic Assumptions - Tax revenue growth: 22% - GDP growth rate: 8%