Fiscal Management in India: A Study of the Impact of FRBM Act

Abstract

Fiscal deficit, the gap between government's aggregate receipts and aggregate consumption, gives the flag to the union about the aggregate acquiring necessary from all sources. Since these deficits had to be met by borrowings, the internal debt of the government accumulated rapidly from 35 percent of GDP at the end of 1980-81 to 53 percent of GDP at the end of 1990-91. Fiscal profligacy seen to have caused balance of payments crisis in 1991 and a reduction in the fiscal deficit was therefore an urgent priority at the start of the reforms. This paper aims at describing intricacies of fiscal deficit and to assess the impact of FRBMA on fiscal deficit in India from 1991-92 to 2016-17 by statistical techniques. The study observes a significant impact of FRBMA on fiscal deficit discipline in India and offers some valuable suggestions for effective fiscal governance and achieving targets pre-set in FRBMA.