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Sunday, 18 March 2012

Detailed Union Budget 2012-13

1.GDP growth to be 7.6% during 2012-13.

What is GDP?

2. Amendment to the FRBM(Fiscal Responsibility and Budget Management) act proposed as part of finance bill. 

The main features of this act are

1.Effective Revenue Deficit 
2.Medium term Expenditure Frame work.

What is FRBM Act?

FRBM( Fiscal Responsibility and Budget Management) was introduced in India by the then Finance Minister of India , Mr.Yashwant Sinha in December 2000.
The main purpose was to eliminate revenue deficit.

The main objects of the act were 

1. To introduce transparent fiscal management system in the country.
2.To introduce more equitable and manageable distribution of the country's debts over the years.
To aim for fiscal stability for India in the long run.

The main rules of the act were

1. The central Government shall not borrow from the RBI(Reserve Bank of India) except under exceptional circumstances where there is temporary shortage of cash in particular financial year.
2. It also prevent RBI from trading in the Primary market for government securities.
3.It restricted RBI to the trading of government securities in the secondary market after April ,2005.

The main failure point is

The rules of this act were unfavorable since it might require the government to cut back on social Expenditure necessary to create productive assets and general up liftment of rural poor of India.  The sudden fancy of monsoon in India,The social dependence on agriculture and over optimistic projections of the task force in charge of developing the targets.
Effective Revenue Deficit: It is the difference between revenue deficit and growth for creation of capital assets.This will help in reducing consumptive component of revenue deficit and create space for increased capital spending.

Medium Term Expenditure Frame work: It sets forth a three year rolling target for expenditure indicators.

Implementation of this act at cent re and the corresponding acts at state level was the pivot in the successful consolidation of fiscal balance prior to the global financial crisis of 2008

continued .....

4 comments:

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