Dr. Yogesh Yadav
Abstract: Fiscal Responsibility and Budget Management Act have been framed by the Government to make the Government accountable for ensuring prudence in fiscal management and fiscal stability by progressive elimination of revenue deficit, sustainable debt management consistent with fiscal stability, greater transparency in fiscal operations and conduct of fiscal policy in a medium term frame work. The 14th Finance Commission has recommended a revised fiscal reform path to consolidate the finances of the Governments from the financial year 2015-16 onwards. The recommendations of the Commission are on the following lines: 1. The Fiscal Deficit of all States will be anchored to an annual limit of 3 per cent of GSDP. The States will be eligible for flexibility of 0.25 per cent over and above this for any given year for which the borrowing limits are to be fixed if their debt-GSDP ratio is less than or equal to 25 per cent in the preceding year. 2. States will be further eligible for an additional borrowing limit of 0.25 per cent of GSDP in a given year for which borrowing limits are to be fixed if the interest payments are less than or equal to 10 per cent of the revenue receipts in the preceding year. 3. The two options under these flexibility provision can be availed of by a State either separately, if any of the above criteria is fulfilled, or simultaneously if both the above stated criteria are fulfilled. Thus, a State can have a maximum fiscal deficit-GSDP limit of 3.5 per cent in any given year. 4. The flexibility in availing the additional limit under either of the two options or both will be available to a State only if there is no revenue deficit in the year in which borrowing limits are to be fixed and the immediately preceding year. Fiscal position and fiscal management is discussed in this research paper for major states of India. The consolidated fiscal position of states deteriorated during 2015-16 and 2016-17 to cross the Fiscal Responsibility and Budget Management (FRBM) threshold due to the Ujwal Discom Assurance Yojana (UDAY) scheme. While state finances were budgeted to improve in 2017-18, revised estimates suggest a deterioration of 35 basis points in gross fiscal deficit to gross domestic product (GFD-GDP) ratio, essentially on the revenue account. Outstanding liabilities of states continued their double digit growth with a rising share of market borrowings in 2017-18. For 2018-19, states have budgeted for a revenue surplus and GFD-GDP ratio of 2.6 per cent. Revenue mobilization remains the key towards attaining the budgeted targets.
Keywords: FRBM Act, Fiscal Deficit, Revenue deficit, Sustainable Debt Management JEL Classification: H2,H23,H25,H51,H53,O1,O23
Volume 6, Issue 1, 2019