The Fiscal Responsibility and Budget Management Act-2003 requires the reduction in revenue deficit by _____ of GDP every year.
0.5%
The question is based on the targets set by the Fiscal Responsibility and Budget Management (FRBM) Act, 2003.
The FRBM Act was enacted to bring fiscal discipline and to reduce the government's deficits in a phased manner.
Under the original rules of the Act, the revenue deficit was required to be reduced by an amount equivalent to 0.5% of GDP or more every year.
The Act also required the fiscal deficit to be reduced by at least 0.3% of GDP each year, with the aim of eventually eliminating the revenue deficit.
The purpose was to ensure inter-generational equity in fiscal management and long-term macroeconomic stability.
The figures 2.5%, 4% and 6% do not correspond to the annual revenue-deficit reduction target of the FRBM Act.
Hence, the FRBM Act-2003 requires the reduction in revenue deficit by 0.5% of GDP every year.
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