With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?

Explore Courses UPSC Exam UPSC Test Series Free Notes EduRev Infinity

Open App

UPSC Exam > UPSC Questions > With reference to the Fiscal Responsibility a...

Join the Discussion on the App

With reference to the Fiscal Responsibility and Budget Management(FRBM) Act, consider the following statements:
1. The FRBM Act bans the purchase of primary issues of the Central Government securities by the RBI.
2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.
Which of the statements given above is/are correct?

a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2

Correct answer is option 'A'. Can you explain this answer?

FREE This question is part of

Test: Indian Economy -1

Attempt Test

Attempt this Test

Most Upvoted Answer

With reference to the Fiscal Responsibility and Budget Management(FRBM...

Explanation:

1. The FRBM Act bans the purchase of primary issues of the Central Government securities by the RBI:
- This statement is correct. The FRBM Act prohibits the RBI from directly subscribing to primary issues of Central Government securities in order to prevent monetization of the government's deficit.
2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government:
- This statement is incorrect. The main objective of the FRBM Act is not to eliminate the fiscal deficit but to ensure inter-generational equity in fiscal management, long term macroeconomic stability, better coordination between fiscal and monetary policy, and transparency in fiscal operation of the government.
Therefore, the correct answer is option 'A', 1 only.

Answered by Notes Wala · View profile

Free Test

FREE

Test: Indian Economy -1
50 Ques | 60 Min

Start Free Test

View all free UPSC tests

Community Answer

With reference to the Fiscal Responsibility and Budget Management(FRBM...

Fiscal Responsibility and Budget Management (FRBM) became an Act in 2003. The objective of the Act is to ensure inter-generational equity in fiscal management, long-run macroeconomic stability, better coordination between fiscal and monetary policy, and transparency in the fiscal operation of the Government.
FRBM Act provides a legal institutional framework for fiscal consolidation. It is now mandatory for the Central government to take measures to reduce the fiscal deficit, eliminate revenue deficit and generate revenue surplus in the subsequent years. The Act binds not only the present government but also the future Government to adhere to the path of fiscal consolidation. The Government can move away from the path of fiscal consolidation only in case of natural calamity, national security and other exceptional grounds that Central Government may specify. Hence statement 2 is not correct.
Further, the Act prohibits borrowing by the government from the Reserve Bank of India, thereby, making monetary policy independent of fiscal policy. The Act bans the purchase of primary issues of the Central Government securities by the RBI after 2006, preventing monetization of government deficit. The Act also requires the government to lay before the parliament three policy statements in each financial year namely Medium Term Fiscal Policy Statement; Fiscal Policy Strategy Statement and Macroeconomic Framework Policy Statement. Hence statement 1 is correct.
Through Finance Act 2012, amendments were made to the Fiscal Responsibility and Budget Management Act, 2003 through which it was decided that in addition to the existing three documents, the Central Government shall lay another document - the Medium Term Expenditure Framework Statement (MTEF) - before both Houses of Parliament in the Session immediately following the Session of Parliament in which Medium-Term Fiscal Policy Statement, Fiscal Policy Strategy Statement and Macroeconomic Framework Statement are laid.
The concepts of the “Effective Revenue Deficit” and “Medium Term Expenditure Framework” statement are the two important features of the amendment to the FRBM Act in the direction of expenditure reforms. Effective Revenue Deficit is the difference between revenue deficit and grants for the creation of capital assets. This will help in reducing the consumptive component of the revenue deficit and create space for increased capital spending. Effective revenue deficit has now become a new fiscal parameter. The “Medium-term Expenditure Framework” statement will set forth a three-year rolling target for expenditure indicators.

Share via Whatsapp

Attention UPSC Students!

To make sure you are not studying endlessly, EduRev has designed UPSC study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in UPSC.

Current Affairs & Hindu Analysis: Daily, Weekly & Monthly

Lucent for GK

History for UPSC CSE

Indian Polity for UPSC CSE

View all answers Start learning for free

< Previous Question Next Question >

Explore Courses for UPSC exam

Similar UPSC Doubts

Consider the following statements1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combine d) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.3. As per the Constitution of India, it is mandatory for a State to take the Central Governments consent for raising any loan if the former owes any outstanding liabilities to the latter.Which of the statements given above is/are correct?[2018]

View answer

Consider the following statements :1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined government by 2023, comprising 40% for the Central Governments and 20% for the State Governments.2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.3. As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.Q.Which of the statements given above is/are correct?

View answer

With reference to theState Development Loan, consider the following statements: These are dated securities issued by states to meet their budgetary needs. These securities carry less interest rate as compared to the other Central Government securities.Which of the statements given above is/are correct?

View answer

With reference to RBl's Open Market Operations (OMO), consider the following statements: It is the sale and purchase of government securities and treasury bills by the RBI. The RBI does not undertake OMO of securities issued by State governments. Its objective is to regulate the money supply in the economy. The RBI carries it out through Commercial banks and does not directly deal with the public. Which of the statements given above are correct?

View answer

With reference to Retail Direct Scheme, consider the following statements :1. It is a one-stop solution to facilitate investment in Government Securities by Individual Investors.2. By enacting it, India becomes the first country to allow its retail investors to participate in the government securities market.3. Non-Resident retail investors are not eligible to invest in Government securities under this scheme.Which of the statements given above is/are correct ?

View answer

Top Courses for UPSCView all

Current Affairs & Hindu Analysis: Daily, Weekly & Monthly

Lucent for GK

History for UPSC CSE

Indian Polity for UPSC CSE

CSAT Preparation

Top Courses for UPSC

View all

With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?

Share with a Friend

Answer this doubt

Question Description
With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.

Solutions for With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC. Download more important topics, notes, lectures and mock test series for UPSC Exam by signing up for free.

Here you can find the meaning of With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?, a detailed solution for With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice With reference to the Fiscal Responsibility and Budget Management(FRBM) Act,consider the following statements:1. The FRBM Act bans the purchase ofprimary issues of the Central Government securities by the RBI.2. The rules under the FRBM Act aim to eliminate the fiscal deficit of the Central Government.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? tests, examples and also practice UPSC tests.

Explore Courses for UPSC exam