Economics • Indian EconomyHard
What does the 'Fiscal Responsibility and Budget Management (FRBM) Act, 2003' mandate for the Central Government of India?
A. Institutionalizing financial discipline, reducing fiscal deficit, and eliminating revenue deficit over specified timeline targets✓ Correct Answer
B. Ensuring that foreign exchange reserves never fall below six months of import cover requirements
C. Setting mandatory minimum interest rates on small savings instruments administered by the postal department
D. Prohibiting the central government from borrowing funds from international multilateral financial institutions
💡 Solution & Explanation
The FRBM Act was enacted to institutionalize fiscal discipline, reduce the fiscal deficit, and eliminate the revenue deficit, thereby ensuring macro-economic stability and prudent public debt management. Distractors mention foreign exchange import cover, postal savings rates, or bans on multilateral borrowing which fall outside FRBM mandates. The Act empowers the government to suspend targets during unforeseen national calamities or structural economic emergencies using escape clauses. Amendments over the years have recalibrated deficit glide paths to align with changing macroeconomic realities.
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