DMPQ: What is FRBM act? Why the objectives of FRBM were not achieved.

FRBM is fiscal responsibility and budget management act is an act of parliament of India 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 of the budget was to eliminate the revenue deficit and to bring down the fiscal deficit  to a manageable 3% of the GDP by March 2008. The act purpose was to introduce Fiscal Management system in the country and to introduce a more equitable and manageable distribution of the country’s debts over the years.

It also mandate for certain documents to be tabled in the Parliament annually with regards to country’s fiscal policy. The documents includes Medium term policy statement, Fiscal policy strategy statement and Macro economic framework statement.

The targets for the FRBM were delayed due to the financial crisis of 2007. It forces the government to spend more and private investments were in the doldrums. The other reason for failure to comply with FRBM act was India’s over dependence on Monsoon. The compliance to FRBM act would have led to reduction in social sector expenditure.


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