The Hindu : National : Govt. shows commitment to reducing fiscal deficit

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Sunday, Jul 04, 2004

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Govt. shows commitment to reducing fiscal deficit

By Our Special Correspondent

NEW DELHI, JULY 3. The Government has demonstrated its commitment to maintaining fiscal discipline by notifying the rules under the Fiscal Responsibility and Budget Management (FRBM) Act. Under the rules, which become effective from Monday next, the Government would have to reduce the revenue deficit by at least 0.5 per cent of the Gross Domestic Product (GDP) and the fiscal deficit by at least 0.3 per cent during the current financial year.

Similarly, the rules have capped the level of guarantees and total liabilities that the Government can assume every year. The Act also prohibits the Government from borrowing from the Reserve Bank of India after April 1, 2006.

Through the FRBM discipline, the Government is also committed to undertake an intra-year assessment of the achievements of its budgetary targets. At the end of the second quarterly assessment, if the non-debt receipts are less than 40 per cent of the budget estimates or the revenue or fiscal deficit is more than 45 per cent of the budget estimates, the Government would have to undertake corrective measures and the Finance Minister would have to make a statement in both Houses of Parliament about them.

Besides, Parliament would be informed on a quarterly basis the assessment of trends in receipts and expenditure.

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