3%
FRBM Act 2003: Understanding Fiscal Deficit Target
The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was enacted in India with the primary goal of enhancing macroeconomic stability through fiscal consolidation. This means reducing the government's budget deficit and managing public debt.
Original FRBM Act Target
The original FRBM Act laid down specific targets for the government to achieve fiscal discipline over a period of time. A key objective outlined in the Act was:
- To reduce the **fiscal deficit** to 3% of the Gross Domestic Product (GDP) by the financial year 2008-09.
This target represented a significant commitment by the government to control its borrowing and ensure a more stable economic environment. Fiscal deficit is the difference between the government's total expenditure and its total revenue (excluding borrowings).
Context of Macroeconomic Reforms
Setting this target was a crucial part of the broader macroeconomic reforms aimed at strengthening the Indian economy. Achieving the 3% fiscal deficit target was seen as essential for:
- Controlling inflation.
- Reducing the government's debt burden.
- Improving investor confidence.
- Ensuring sustainable economic growth.
Therefore, the initial target for the fiscal deficit as a percentage of GDP under the original FRBM Act 2003 was 3%.
Important Questions from Fiscal Policy
- Which of the following was a major fiscal reform introduced in India as part of the 1991 economic reforms?
In the post-reform era, fiscal prudence became central to macroeconomic stability. Which of the following Acts was enacted in 2003 to institutionalise fiscal discipline in India?
- The intervention of the government whether to expand demand or reduce it constitutes the _________ function.
The _________ refers to the excess of government’s revenue expenditure over revenue receipts.
- A situation in which the government may spend an amount equal to the revenue it collects is:
