Economics • Indian EconomyEasy
What does the 'Fiscal Responsibility and Budget Management (FRBM) Act, 2003' primarily seek to achieve?
A. Elimination of revenue deficit and reduction of fiscal deficit to sustainable levels for macroeconomic stability.✓ Correct Answer
B. Complete abolition of indirect taxes across all state borders.
C. Direct control over the commercial lending rates set by public sector banks.
D. Mandatory privatization of all loss-making public sector undertakings within a fixed timeframe.
💡 Solution & Explanation
The Fiscal Responsibility and Budget Management Act of 2003 institutionalized legal targets to eliminate revenue deficits and lower fiscal deficits, fostering long-term macroeconomic stability in India. Incorrect selections pointing to indirect tax abolition or central bank lending control mischaracterize its core focus on government borrowing limits. Subsequent amendments introduced specific debt-to-GDP ratio targets to strengthen fiscal prudence.
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