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SSC CHSL 2025 PYQ — Question 97

SSC CHSL - 22 Nov 2025 - Shift 1 • General Awareness • Q97

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The Fiscal Responsibility and Budget Management Act-2003 mandates the central government to reduce fiscal deficit to not more than _____ of GDP.

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Correct answer: C

Explanation

The correct answer is Option 3: 3%.
Explanation:

  • The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, is a legislation enacted to ensure fiscal discipline on the part of the Central Government.
  • Key Objective: The primary aim of this Act was to mandate that the Central Government reduce its Fiscal Deficit and limit it to 3% of the Gross Domestic Product (GDP).
  • Revenue Deficit: Additionally, another objective of this Act was to bring the Revenue Deficit down to zero.
  • Significance of FRBM: This law prevents the government from engaging in indiscriminate borrowing and ensures financial stability within the country's economy.
  • Amendments and Reviews: These targets have been reviewed periodically (for instance, in 2016, based on the recommendations of the N.K. Singh Committee). The Act also includes a provision—known as the 'Escape Clause'—to relax these targets under extraordinary circumstances, such as during the COVID-19 pandemic.

Key Economic Terms (Quick Revision):

  • Fiscal Deficit: The difference between the government's total expenditure and its total receipts (excluding borrowings). It indicates the extent of borrowing the government needs to undertake.
  • GDP (Gross Domestic Product): The total market value of all final goods and services produced within a country's geographical boundaries during a specific year.
  • N.K. Singh Committee (2016): This committee recommended that the Fiscal Deficit be brought down to 2.5% and the Debt-to-GDP ratio to 60% (comprising 40% for the Centre and 20% for the States) by the year 2023.

Important Questions for Upcoming Exams:
Question: In which year did the FRBM Act come into effect?
Answer: July 5, 2004. Question: According to Budget 2024-25, what is India's fiscal deficit target?
Answer: The target is to bring it below 4.5% by 2025-26.
Question: What is the difference between 'Revenue Deficit' and 'Effective Revenue Deficit'?
Answer: In the Effective Revenue Deficit, grants provided for the creation of capital assets are excluded.