UPSC Prelims 2010 · General Studies

Question 26: Economy and Social Development

Which one of the following was not stipulated in the Fiscal Responsibility and Budget Management Act, 2003 ?

aElimination of revenue deficit by the end of the fiscal year 2007-08

bNon-borrowing by the central government from Reserve Bank of India except under certain circumstances

cElimination of primary deficit by the end of the fiscal year 2008-09

dFixing government guarantees in any financial year as a percentage of GDP

AnswerThe answer is (c).

The FRBM Act, 2003 set a revenue deficit target (elimination by 2007-08 in the Act itself, a date later pushed back), a fiscal deficit target, a bar on direct borrowing by the Centre from the RBI except in stated circumstances such as ways and means advances, and a ceiling on government guarantees as a share of GDP. It did not stipulate elimination of the primary deficit by 2008-09. Remember: the FRBM framework is about revenue deficit, fiscal deficit, RBI borrowing and guarantees.

Why each option is right or wrong

(a) The Act did call for eliminating the revenue deficit by 2007-08, a date later revised.
(b) The Act bars the Centre from borrowing from the RBI apart from stated exceptions.
(c) Right (the one not stipulated): no elimination of the primary deficit by 2008-09 was fixed.
(d) A ceiling on government guarantees as a share of GDP was part of the framework.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2010, General Studies, Series A. The paper on upsc.gov.in.