Economics • Indian EconomyHard

Under the provisions of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, what statutory target was established to anchor medium-term fiscal consolidation for the central government?

A. Eliminating the revenue deficit entirely and bringing the fiscal deficit down to three percent of gross domestic product✓ Correct Answer

B. Achieving zero current account deficit within international trade transactions by successive financial years

C. Maintaining foreign exchange reserves equal to twenty-four months of total import requirements

D. Capping public sector bank non-performing assets below one percent of total advances

💡 Solution & Explanation

The Fiscal Responsibility and Budget Management Act, 2003, institutionalized financial discipline by mandating the central government to eliminate the revenue deficit and reduce the fiscal deficit to three percent of gross domestic product by specified target dates, subject to escape clauses during economic emergencies. Subsequent amendments revised these glide paths while reaffirming the core deficit reduction objectives. It aims to ensure macro-prudential management of public finances and prevent runaway public debt accumulation. The Act promotes inter-generational equity in fiscal burden sharing.

🚩 Report a problem

Practice more Economics Indian Economy questions →

Under the provisions of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, what statutory target was established to anchor medium-term fiscal consolidation for the central government?

More Economics Indian Economy questions