Economics • Indian EconomyMedium
Examine the fiscal framework established under the Fiscal Responsibility and Budget Management Act of 2003. Which specific statutory target was originally mandated for the fiscal deficit as a percentage of gross domestic product?
A. Reduction of the fiscal deficit to three percent of gross domestic product by a specified target year✓ Correct Answer
B. Complete elimination of public debt within a five-year rolling budgetary horizon
C. Maintenance of zero revenue deficit alongside a double-digit capital expenditure growth rate
D. Capping aggregate external borrowings at one percent of total foreign exchange reserves
💡 Solution & Explanation
The Fiscal Responsibility and Budget Management Act enacted in 2003 mandated the central government to eliminate revenue deficit and bring down the fiscal deficit to three percent of gross domestic product by stipulated timelines. Subsequent amendments introduced flexibility provisions to accommodate economic shocks and counter-cyclical stimulus packages. This legislation aims to ensure long-term macroeconomic stability and prudent public finance management.
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