Question
Which of the following is a primary objective of the 'Fiscal Responsibility and Budget Management (FRB
- M Act' in India?
Solution
- The FRBM Act, enacted in 2003, is a legal framework for fiscal consolidation . Its primary objectives are to ensure:
- Inter-generational equity in fiscal management.
- Long-term macroeconomic stability.
To achieve this, the Act (and its subsequent rules) mandate the central government to set and adhere to specific limits for key deficit indicators -- notably the Fiscal Deficit and the Revenue Deficit -- as a percentage of GDP. It also sets targets for reducing public debt. The goal is not necessarily to eliminate the deficit but to bring it down to prudent, sustainable levels.
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