UPSC Prelims 2006 · General Studies

Question 24: Economy and Social Development

Which one of the following statements is correct? Fiscal Responsibility and Budget Management Act (FRBMA) concerns

afiscal deficit only

brevenue deficit only

cboth fiscal and revenue deficit

dneither fiscal deficit nor revenue deficit

AnswerThe answer is (c).

The Fiscal Responsibility and Budget Management Act, 2003 (in force from 2004) sets the Centre a path for both deficits: eliminate the revenue deficit and bring the fiscal deficit down to 3 per cent of GDP, with yearly targets and statements laid before Parliament. It also stopped the Reserve Bank from subscribing to government securities in the primary market from 2006. So it concerns both deficits, not just one.

Why each option is right or wrong

(a) The Act also targets the revenue deficit.
(b) The Act also targets the fiscal deficit (3 per cent of GDP).
(c) Correct: it targets both the fiscal and the revenue deficit.
(d) It is built around deficit reduction, so this is plainly wrong.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2006, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.