An analytical study of Fiscal Deficit and Public Debt of the Government of India after the Fiscal Responsibility and Budget Management FRBM Act 2003 FRBMA

Abstract

newline Indian economy has been facing persistent twin challenges of high fiscal deficit and public debt for many years. The Government of India has enacted the Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) to ensure fiscal discipline and macroeconomic balance by setting targets for these two indicators, among others. However, the effectiveness of the FRBMA as regards its impact on Central Government s deficit and debt levels has been a matter of debate and research for long. This study evaluates the impact of FRBMA on fiscal deficit and public debt of the Government of India for a period of 20 years (2003-2004 to 2022-2023), i.e., after the enactment of the FRBMA, 2003 along with a simultaneous study of pattern of variation in these two indicators for the reference period. The study has been divided into seven chapters with last three chapters being analytical in nature. Secondary data sources of the Central Government, chiefly the Union Budget and Economic Survey documents have been used to derive data-sets. For analysis of data, two sample paired t-Test and Pearson s Correlation Coefficient have been used with base significance level of 5 percent. The study has found that the FRBMA has impacted the fiscal deficit in a statistically significant way since its enactment. However, its impact on public debt has largely been statistically insignificant for the reference years. It has also been statistically determined that the FRBMA has been ineffective in serving as a legislative measure to simultaneously target the fiscal deficit and public debt levels to achieve a unified fiscal policy outcome. newline newlineFRBM Act, 2003; Fiscal Deficit; Public Debt; Total Outstanding Liabilities; Budget Management; Fiscal Responsibility; Primary Deficit; FRBM Rules, 2004; Revenue Receipts; Capital Receipts; Internal Debt; External Debt newline