Fiscal Responsibility and Budget Management FRBM Act 2003

The Fiscal Responsibility and Budget Management FRBM Act 2003 aims to achieve financial discipline, reduce fiscal deficit, improve macro economic management.

The main purpose of FRBM Act 2003 was to eliminate revenue deficit(RD) and bring down the fiscal deficit (FD) to a manageable 3% of GDP by march 2008.

The FRBM Act 2003 provides for making rules to specify the annual targets for reduction of fiscal deficit and revenue deficit, contingent liabilities and total liabilities.

The main objectives of the act were

1. to introduce transparent fiscal management system
2. to introduce a more equitable and manageable distribution of the country's debts over the years
3. to aim for fiscal stability for India in the long run

Along with the budget and demands for grants, the government of India should submit the following documents to the parliament.

1. Medium-term Fiscal Policy Statement – It should present a three-year rolling target for the fiscal indicators.
2. Fiscal Policy Strategy Statement – This should enumerate strategies and policies for the upcoming Financial Year including strategic fiscal priorities, taxation policies, key fiscal measures
3. Macro-economic Framework Statement – This report should contain forecasts enumerating the growth prospects of the country - GDP growth etc.

The Act provided that the Central Government shall not borrow from the Reserve Bank of India(RBI) except under exceptional circumstances where there is temporary shortage of cash in particular financial year.