FRBM ACT- A STEP TOWARDS FISCAL DISCIPLINE

Abstract

A developing economy has to spend more to increase the level of disposable income in the hands of its citizens. It has to undertake various projects which can provide long term benefits to the people and can raise their standard of living. Such projects involves huge amount of investment which are met through borrowings. Reckless borrowings results in unproductive interest expenditure, thereby depriving the nation with most of its income. In order to fix the responsibility with the government and to prevent it from unnecessary borrowings for unproductive purposes, the FRBM Act was enacted in 2003. However, due to the international financial crisis from 2007, the implementation of this act was postponed and later on suspended in 2009. The current paper attempts to highlight the features and the recommendations of this Act.