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The objective of the Fiscal Responsibility and Budget Management Act, 2004 is
1. to reduce revenue deficit.
2. to reduce fiscal deficit.
3. to ensure that public debt does not exceed 50% of the GDP of the year from 2011.
4. All of the above

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Correct Answer - Option 4 : All of the above

The correct answer is All of the above.

  • The Fiscal Responsibility and Budget Management (FRBM) Act is a law enacted by the Government of India in 2003 to ensure fiscal discipline – by setting targets including reduction of fiscal deficits and elimination of revenue deficit.
  • The main objectives of the act were:
    • Introduce transparent fiscal management systems in the country.
    • Introduce a more equitable and manageable distribution of the country’s debts over the years.
    • Aim for fiscal stability for India in the long run.
    • Ensure that public debt does not exceed 50% of the GDP of the year from 2011.
  • Revenue Deficit Target – revenue deficit should be eliminated by March 31, 2018. The minimum annual reduction target was 0.5% of GDP.
  • Fiscal Deficit Target – fiscal deficit should be reduced to 3% of GDP by March 31, 2018. The minimum annual reduction target was 0.3% of GDP.

  • In May 2016, the government set up a committee under NK Singh to review the FRBM Act.
    • The committee recommended that the government should target a fiscal deficit of 3% of the GDP in years up to March 31, 2020, cut it to 2.8% in 2020-21, and to 2.5% by 2023.

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