The Fiscal Responsibility and Budget Management Act-2003 requires the reduction in revenue deficit by ____ of GDP every year.
Show answer & explanation
Correct answer: A
Explanation
- Explanation: The Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) was enacted to maintain the fiscal discipline of the Government of India.
- Target: Originally, according to the rules of this Act, the government was required to reduce its Revenue Deficit at a rate of 0.5% of the Gross Domestic Product (GDP) per annum, with the ultimate aim of bringing it down to zero.
- Fiscal Deficit: Similarly, the target was set to reduce the Fiscal Deficit by 0.3% per annum so that it could be capped at 3% of the GDP.
- Objective: Its primary objective is to rein in government debt and deficits, and to ensure long-term macroeconomic stability.
Key Points:
- Revenue Deficit: Occurs when the government's revenue expenditure (spending) exceeds its revenue receipts (income).
- Fiscal Deficit: The difference between the government's total expenditure and its total receipts (excluding borrowings). It indicates the government's total borrowing requirements.
- N.K. Singh Committee: In 2016, the government constituted a committee chaired by N.K. Singh to review the FRBM Act.
Important Questions for Upcoming Examinations:
Question: In which year did the FRBM Act come into force in India? Answer: July 2004 (The Act itself dates back to 2003).
Question: Who was the Chairman of the committee constituted to review the Fiscal Responsibility and Budget Management (FRBM) framework? Answer: N.K. Singh.
Question: What does the Fiscal Deficit signify? Answer: It indicates the government's total borrowing requirements.
Question: Under which Act was the target set to bring the Revenue Deficit down to zero? Answer: The FRBM Act, 2003.