The Fiscal Responsibility and Budget Management Act (FRBM) Act is a law passed by the Indian Parliament in 2003. The objective of the Act is to provide a framework for fiscal discipline at the central and state government levels in India.
The FRBM Act sets targets for the central and state governments to reduce their fiscal deficits and debt levels. The Act requires the government to maintain a fiscal deficit of not more than 3% of the GDP and a debt-to-GDP ratio of not more than 60%. The Act also mandates the setting up of a Fiscal Responsibility and Budget Management Committee (FRBM) to oversee the implementation of the Act.
The FRBM Act has several provisions, including:
- Medium-term Fiscal Policy Statement: The government is required to present a medium-term fiscal policy statement to Parliament every year, which outlines its fiscal policy objectives and targets.
- Fiscal Responsibility and Budget Management Rules: The government is required to frame rules for fiscal responsibility and budget management, which specify the steps to be taken to achieve the fiscal targets set by the Act.
- Transparency and Accountability: The Act requires the government to provide regular updates on its fiscal position, including its revenue and expenditure, and to submit regular reports to Parliament.
- Exemptions: The Act allows for certain exemptions, such as in case of national security or natural calamities.
The FRBM Act has been amended several times since its enactment, most recently in 2018, to allow for greater flexibility in meeting fiscal targets. The Act has been effective in promoting fiscal discipline and reducing the fiscal deficit and debt levels of the central and state governments in India. However, the Act has also been criticized for being too rigid and for not taking into account the cyclical nature of the economy.