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Consider the following statements regarding Fiscal prudence.
- Fiscal prudence implies spending excess to create demand in the economy.
- Fiscal Responsibility and Budget Management (FRBM) Act, 2003 institutionalised the concept of fiscal prudence.
Which of the above statements is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'B'. Can you explain this answer?
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Consider the following statements regarding Fiscal prudence. Fiscal pr...
Fiscal Prudence: Meaning and Significance
Fiscal prudence refers to the responsible management of government finances. It involves ensuring that the government spends within its means and does not incur excessive debt. The objective of fiscal prudence is to maintain macroeconomic stability, promote sustainable growth, and minimize the risk of a fiscal crisis.
Fiscal Responsibility and Budget Management (FRBM) Act, 2003
The FRBM Act, 2003 is an important legislation that institutionalized the concept of fiscal prudence in India. The act aims to ensure fiscal discipline and transparency in the management of public finances.
The key provisions of the FRBM Act, 2003 are as follows:
- It mandates the government to reduce its fiscal deficit to a specified level (currently 3% of GDP).
- It requires the government to present a Medium-Term Fiscal Policy Statement and a Fiscal Policy Strategy Statement to Parliament every year.
- It establishes an independent Fiscal Responsibility and Budget Management (FRBM) Review Committee to evaluate the government's compliance with the provisions of the act.
The act has played a significant role in improving the fiscal performance of the Indian government. It has helped to reduce the fiscal deficit, control inflation, and promote sustainable growth.
Correct Answer: Option B
The first statement is incorrect as fiscal prudence does not imply spending excess to create demand in the economy. Rather, it involves spending wisely and within the government's means to promote sustainable growth and stability.
The second statement is correct as the FRBM Act, 2003 institutionalized the concept of fiscal prudence in India by mandating the government to reduce its fiscal deficit and present a Medium-Term Fiscal Policy Statement and a Fiscal Policy Strategy Statement to Parliament every year.
Fiscal prudence refers to the responsible management of government finances. It involves ensuring that the government spends within its means and does not incur excessive debt. The objective of fiscal prudence is to maintain macroeconomic stability, promote sustainable growth, and minimize the risk of a fiscal crisis.
Fiscal Responsibility and Budget Management (FRBM) Act, 2003
The FRBM Act, 2003 is an important legislation that institutionalized the concept of fiscal prudence in India. The act aims to ensure fiscal discipline and transparency in the management of public finances.
The key provisions of the FRBM Act, 2003 are as follows:
- It mandates the government to reduce its fiscal deficit to a specified level (currently 3% of GDP).
- It requires the government to present a Medium-Term Fiscal Policy Statement and a Fiscal Policy Strategy Statement to Parliament every year.
- It establishes an independent Fiscal Responsibility and Budget Management (FRBM) Review Committee to evaluate the government's compliance with the provisions of the act.
The act has played a significant role in improving the fiscal performance of the Indian government. It has helped to reduce the fiscal deficit, control inflation, and promote sustainable growth.
Correct Answer: Option B
The first statement is incorrect as fiscal prudence does not imply spending excess to create demand in the economy. Rather, it involves spending wisely and within the government's means to promote sustainable growth and stability.
The second statement is correct as the FRBM Act, 2003 institutionalized the concept of fiscal prudence in India by mandating the government to reduce its fiscal deficit and present a Medium-Term Fiscal Policy Statement and a Fiscal Policy Strategy Statement to Parliament every year.
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Consider the following statements regarding Fiscal prudence. Fiscal pr...
Fiscal prudence
- In simple words, fiscal prudence is Spending within budget.
- For any economy to mature, fiscal prudence is critical. If the government continues to spend way more than its revenues, it will either have to print more currency or borrow from the market to meet the shortfall. Printing currency will fuel inflation and, at times, hyper-inflation.
- In a bid to avoid these scenarios and mandate fiscal prudence, the Government of India passed the Fiscal Responsibility and Budget Management (FRBM) Act in 2003. Its objective was to institutionalize fiscal prudence and reduce the country’s fiscal deficit in such a manner that it gradually moves towards balancing the Budget.
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Consider the following statements regarding Fiscal prudence. Fiscal prudence implies spending excess to create demand in the economy. Fiscal Responsibility and Budget Management (FRBM) Act, 2003 institutionalised the concept of fiscal prudence.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?
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