Question

Q. Which of the following documents is/are mandatory for the Government to table in Parliament at the time of presenting the Union budget according to The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003?

Select the correct answer using the codes given below:

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

Answer 1

The correct option is D 1, 2 and 3

Explanation:

All statements are correct.

FRBM Act:

The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, establishes financial discipline to reduce the fiscal deficit.

Background

The FRBM Bill was introduced by the then finance minister, Yashwant Sinha, in 2000. The Bill, approved by the Union Cabinet in 2003, became effective from July 5, 2004.

Objectives:

• The FRBM Act aims to introduce transparency in India's fiscal management system.
• The Act’s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India.
• The FRBM Act was enacted to introduce a more equitable distribution of India's debt over the years.

Features of FRBM:

• The FRBM Act made it mandatory for the government to place the following along with the Union Budget documents in Parliament annually:

1. Medium Term Fiscal Policy Statement.
2. Macroeconomic Framework Statement.
3. Fiscal Policy Strategy Statement.

• The FRBM Act proposed that revenue deficit, fiscal deficit, tax revenue, and the total outstanding liabilities be projected as a percentage of gross domestic product (GDP) in the medium-term fiscal policy statement.

FRBM Exceptions:

On grounds of national security, calamity, etc, the set targets of fiscal deficits and revenue could be exceeded. It is known as the Escape Clause.