SSC
What is the full form of FRBM, as in the FRBM Act, 2003?
Answer (Detailed Solution Below)View answer ▾Hide ▴
Answer: Option B — Fiscal Responsibility and Budget Management
Detailed Solution
FRBM stands for "Fiscal Responsibility and Budget Management", as in the FRBM Act, 2003.
About the FRBM Act:
- It was passed by Parliament in 2003 and came into force on 5 July 2004.
- It aims to bring discipline to government finances, by reducing the fiscal deficit and the revenue deficit, and by managing public debt.
- It requires the government to place three statements before Parliament with the Budget: the Medium-Term Fiscal Policy Statement, the Fiscal Policy Strategy Statement and the Macro-Economic Framework Statement.
Original targets:
- To reduce the fiscal deficit to 3 per cent of GDP.
- To eliminate the revenue deficit.
- These targets were postponed several times.
Changes:
In 2016, a committee under N. K. Singh was set up to review the FRBM Act. It recommended using debt as the main target: a general government debt-to-GDP ratio of 60 per cent (40 per cent for the Centre and 20 per cent for the states) by 2023, and a fiscal deficit of 3 per cent of GDP.
The FRBM Act was amended in 2018 to adopt the debt target for the Centre (40 per cent of GDP).
An "escape clause" allows the government to deviate from the targets in special situations, such as national security, war, national calamity or severe economic downturn.
Recent position:
- The fiscal deficit rose to about 9.2 per cent of GDP in 2020-21 due to the COVID-19 pandemic.
- The government brought it down to 4.8 per cent in 2024-25, and targeted 4.4 per cent for 2025-26.
- From 2026-27, the government plans to target a declining debt-to-GDP ratio, aiming for about 50 per cent by 2031.
Related terms:
- Fiscal deficit: total expenditure minus total receipts (excluding borrowings).
- Revenue deficit: revenue expenditure minus revenue receipts.
- Primary deficit: fiscal deficit minus interest payments.
- Many states have also passed their own fiscal responsibility laws.
Why not the other options?
- ✗"Financial Regulation and Banking Management" is not the correct expansion.
- ✗"Fiscal Reforms and Budget Monitoring" is not the correct expansion.
- ✗"Federal Revenue and Budget Management" is not the correct expansion.
Quick tip
Remember: FRBM = Fiscal Responsibility and Budget Management Act, 2003 (in force 2004; fiscal deficit target 3 per cent of GDP; N. K. Singh Committee 2016; debt target 2018); primary deficit = fiscal deficit minus interest.
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Budget, Fiscal Policy & Taxation — Preparation
This question tests your understanding of Budget, Fiscal Policy & Taxation, a key topic in the General Knowledge section. The detailed solution above uses a step-by-step approach to show the reasoning, and where available, a shortcut that helps you solve similar questions in under 90 seconds during the actual exam.
This topic covers the Union Budget and fiscal policy: revenue and capital budgets, types of deficits (fiscal, revenue and primary), the FRBM Act, direct and indirect taxes, the Goods and Services Tax (GST) and the GST Council, and the role of the Finance Commission. Common questions ask how each deficit is defined, which article covers the annual financial statement (Article 112), which taxes GST replaced, and the difference between direct and indirect taxes. GST was introduced on 1 July 2017 through the 101st Constitutional Amendment. Budget figures change every year, so check recent numbers in current affairs. Practise the budget, fiscal policy and taxation questions below, written in the style of the general awareness sections of exams such as SSC, banking, railways, CUET GAT, MAH CET and CLAT. Each question comes with a detailed explanation that adds related facts, so every question helps you revise more than one point.