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Fiscal Responsibility and Budget Management(FRBM) Act - 2003:
The FRBM Act was enacted by Parliament in 2003 in order to bring the fiscal discipline. It received the President’s assent in August the same year. The United Progressive Alliance (UPA) government had notified the FRBM Rules in July 2004. It is a Parliamentary control over Political and even appointed executives of Indian Government. The main part of this Act will be the Finance ministers who ever occupy the place of Finance Ministry that will frame the Budget.
The following points are worth notable of FRBM Act.,
1) The FRBM Rules impose limits on fiscal and revenue deficit. Hence, it will be the duty of the Union government to stick to the deficit targets.
2) As per the target, revenue deficit, which is revenue expenditure minus revenue receipts, have to be reduced to nil in five years beginning 2004-05.
3) The target reduction annually is in Deficits, Government borrowings and debt.
4) Government to annually reduce the revenue deficit by 0.5% and the fiscal deficit by 3% of GDP beginning fiscal 2004-2005
5) Elimination of Revenue deficit and reduction of fiscal deficit to 3% of GDP by March 31, 2009.
6) A cap on the level of guarantee and total liabilities of the government.
7) Prohibits Government to borrow from RBI(major step)
8) Placing an assessment of trends in receipts and expenditure before both house of the parliament on a quarterly basis
9) Annual presentation in the Parliament , the Frame work Statement, Medium Term Fiscal Policy Statement and Fiscal policy strategy statement.
10) Under exceptional circumstances, Government may be compelled to fall short of the targets. In case of deviations, the Government would not only be required to take corrective measures, but the Finance Minister shall also make a statement in both the House of Parliament.
11) Borrowing from RBI is permitted in exceptional situations like natural calamities.
12) The need for fiscal discipline , Increase plan expenditure, Reduce the amount of borrowings is clear, Particularly in the era of Globalization when penalty for irresponsibility is high.
The FRBM Act was enacted by Parliament in 2003 in order to bring the fiscal discipline. It received the President’s assent in August the same year. The United Progressive Alliance (UPA) government had notified the FRBM Rules in July 2004. It is a Parliamentary control over Political and even appointed executives of Indian Government. The main part of this Act will be the Finance ministers who ever occupy the place of Finance Ministry that will frame the Budget.
The following points are worth notable of FRBM Act.,
1) The FRBM Rules impose limits on fiscal and revenue deficit. Hence, it will be the duty of the Union government to stick to the deficit targets.
2) As per the target, revenue deficit, which is revenue expenditure minus revenue receipts, have to be reduced to nil in five years beginning 2004-05.
3) The target reduction annually is in Deficits, Government borrowings and debt.
4) Government to annually reduce the revenue deficit by 0.5% and the fiscal deficit by 3% of GDP beginning fiscal 2004-2005
5) Elimination of Revenue deficit and reduction of fiscal deficit to 3% of GDP by March 31, 2009.
6) A cap on the level of guarantee and total liabilities of the government.
7) Prohibits Government to borrow from RBI(major step)
8) Placing an assessment of trends in receipts and expenditure before both house of the parliament on a quarterly basis
9) Annual presentation in the Parliament , the Frame work Statement, Medium Term Fiscal Policy Statement and Fiscal policy strategy statement.
10) Under exceptional circumstances, Government may be compelled to fall short of the targets. In case of deviations, the Government would not only be required to take corrective measures, but the Finance Minister shall also make a statement in both the House of Parliament.
11) Borrowing from RBI is permitted in exceptional situations like natural calamities.
12) The need for fiscal discipline , Increase plan expenditure, Reduce the amount of borrowings is clear, Particularly in the era of Globalization when penalty for irresponsibility is high.
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