FRBM Act
The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003 to set targets for the government to reduce fiscal deficits, however, the targets were put off several times.
The FRBM Act is a fiscal sector legislation enacted by the government of India in 2003.
It aims to ensure fiscal discipline by setting targets including reduction of fiscal deficits and elimination of revenue deficit, however, the targets were postponed several times.
Objectives of FRBM Act
Ensure inter-generational equity in fiscal management
Long run macroeconomic stability
Better coordination between fiscal and monetary policy
Transparency in fiscal operation of the government.
NK Singh Committee
As the government believed the targets were too rigid, the government set up a committee in May 2016, under NK Singh to review the FRBM Act.
The committee recommended that the government should target a fiscal deficit of 3 per cent of the GDP in years up to March 31, 2020 cut it to 2.8 per cent in 2020-21 and to 2.5 per cent by 2023.
It recommended to replace the FRBM Act, 2003, by a new Debt and Fiscal Responsibility Act.
It advised on setting up of a Fiscal council to provide forecasts and analysis for fiscal deficit as well as advise the finance ministry on escape clauses.
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