Section 4(2) of India’s Fiscal Responsibility and Budget Management (FRBM) Act is a key part of the law that aims to keep the country’s economy stable and keep fiscal restraint in place.
In Section 4(2) of the FRBM Act, it says what the central government needs to do to meet its budget deficit goals. The fiscal deficit is the difference between what the government spends and what it brings in, not counting loans. The clause says that the government must gradually cut the budget deficit to make sure it can be paid for in the long run.
The FRBM Act says that the government should try to meet certain budget deficit goals. At first, the Act was supposed to lower the budget deficit to 3% of the country’s gross domestic product (GDP) by the end of March 2008. But later changes to the Act have made it possible to deviate from the goals in cases like national security, environmental disasters, or a serious slowdown in the economy.
The law also says that a Fiscal Responsibility and Budget Management Committee (FRBM Committee) must be set up. The FRBM Committee’s job is to give independent opinions and suggestions on financial issues. The committee is very important because it evaluates the government’s financial success, suggests ways to fix problems, and looks at how close the government is to making its financial goals.
Section 4(2) of the FRBM Act has a number of important effects on how India manages its money. By setting a goal to reduce the budget imbalance, it hopes to make the government more responsible about how it spends and borrows money. The Act acknowledges that high budget deficits that last for a long time can cause problems like inflation, a lack of private investment, and a load on future generations.
The clause makes financial management more open and accountable by requiring the government to share its fiscal deficit numbers, plans for borrowing, and the reasons for any deviations from the goals. This makes sure that the public can look at the government’s fiscal choices and helps keep the integrity of fiscal policy.
By focusing on reducing the fiscal imbalance, the provision also pushes the government to take steps to increase income, cut costs, and be more fiscally responsible. It helps the government get its finances in order and keep track of its total debt, which is important for keeping the economy as a whole stable.
But critics say that tight adherence to fiscal deficit goals can make it harder for the government to spend money on important things like building infrastructure, helping people in need, and providing health care. They say that a rigid fiscal deficit goal could make it harder for the government to stimulate the economy and deal with important social problems when the economy is slowing down or when the need for government action is high.
In India, Section 4(2) of the FRBM Act says what the central government should try to do to meet its budget deficit goals. It encourages fiscal control, openness, and responsibility while keeping the economy as a whole stable. Even though it supports good financial management, some people say it should be possible to be flexible in certain situations to deal with economic downturns and social needs.