What are the reasons for introduction of fiscal responsibility and budget management (frbm) act, 2003? Discuss critically its salient features and their effectiveness?
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Answer:
The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003 which set targets for the government to reduce fiscal deficits. The targets were put off several times. In May 2016, the government set up a committee under NK Singh to review the FRBM Act. The government believed the targets were too rigid. 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.
The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003 which set targets for the government to reduce fiscal deficits. The targets were put off several times. In May 2016, the government set up a committee under NK Singh to review the FRBM Act. The government believed the targets were too rigid. 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.In Budget 2017, Finance Minister Arun Jaitley deferred the fiscal deficit target of 3% of the GDP and chose a target of 3.2%, citing the NK Singh committee report. The Comptroller and Auditor General of India had pulled up the government for deferring the targets which it said should have been done through amending the Act.
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