UPSC Mains 2013 · GS III · Q2 · 10 marks · 200 words

What were the reasons for the introduction of Fiscal Responsibility and Budget Management (FRBM) Act, 2003 ? Discuss critically its salient features and their effectiveness.

हिन्दी में

वित्तीय दायित्व और बजट प्रबंधन (FRBM) अधिनियम 2003 को प्रारम्भ करने के क्या कारण थे ? उसके प्रमुख प्रावधानों और उनकी प्रभाविता का समालोचनात्मक विवेचन कीजिए।

Fiscal Policy and Budgeting

How a topper answered the closest question

Toppers wrote this one in a test series: “Fiscal discipline is a cornerstone for prudent financial management, managing debts responsibly and ensuring sustainable economic growth. Analyse the statement and critically evaluate the achievements and challenges associated with the implementation of the Fiscal Responsibility and Budget Management (FRBM) framework.”

Yarasi Tusharika134 wordsTheir whole copy

Opening · a definition

Fiscal responsibility and Budget management framework provides for fiscal discipline by mandating production of fiscal policy strategy statement, Medium term fiscal policy statement, Macroeconomic framework statement.

Body · points

Achievement of FRBM framework

  1. Transparent fiscal reports production.

  2. Helps in accurate assessment of economic situation

  3. Reduce fiscal deficit to 2.5% of GDP.

  4. Targets to achieve reduction in fiscal deficit and revenue deficit.

  5. Macroeconomic stability by reducing fiscal vulnerabilities

  6. Increased investor confidence.

Challenges

  1. Rigidity in targets → doesn't change with changing economic situations.

  2. Escape clause provides leeway to governments.

  3. Adherence to targets affects the public expenditure.

  4. Implementation challenges like lack of uniformity in all states.

Close · a summary

Though FRBM act has succeeded in setting fiscal discipline but the targets couldn't be met due to disruptions caused by COVID-19 pandemic.

How toppers approach this question, and more on its topic: open the question.

Toppers’ answers to other close questions

Source: UPSC, Civil Services (Main) Examination 2013, General Studies Paper III, Q2. The paper on upsc.gov.in. Themes and links to toppers’ answers are by UPSC Grade, not by UPSC.