Question

Q. According to the Fiscal Responsibility and Budget Management (FRBM) Act, which of the following documents must be placed along with the Budget documents annually in the Parliament:

Select the correct options from the code given below:

• A. 1 only
• B. 1, 3 only
• C. 2, 3 only
• D. 1, 2, 3

Answer 1

The correct option is D 1, 2, 3

Explanation:

Features of the FRBM Act

• It was mandated by the act that the following must be placed along with the Budget documents annually in the Parliament:
  1. Macroeconomic Framework Statement
  2. Medium Term Fiscal Policy Statement and
  3. Fiscal Policy Strategy Statement
• It was proposed that the four fiscal indicators i.e, revenue deficit as a percentage of GDP, fiscal deficit as a percentage of GDP, tax revenue as a percentage of GDP, and total outstanding liabilities as a percentage of GDP be projected in the medium-term fiscal policy statement.

Why was the FRBM Act passed?

The primary objective was the elimination of the revenue deficit and bringing down the fiscal deficit.

The other objectives included:

• Introduction of a transparent system of fiscal management within the country
• Ensuring equitable distribution of debt over the years
• Ensuring fiscal stability in the long run

The act also intended to give the required flexibility to the Central Bank for managing inflation in India.

Targets and Fiscal Indicators as per the FRBM Act

As per the latest target of the FRBM Act:

1. Government is required to limit the fiscal deficit to 3% of the GDP by March 31, 2021.
2. Government is required to limit the debt of the central government to 40% of the GDP by the year 2024-25.