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	Every year, a macro-economic framework statement is presented before Parliament at the time of Union Budget presentation. This is under Section 3(5) of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003.</div>
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	The FRBM Act instructs the government to make an assessment of growth prospects for the economy with regards to specific underlying assumptions. The statement contains an overview of the economy. This includes an assessment regarding the GDP growth rate, fiscal balance of the central government and the external sector balance of the economy.</div>
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	Monetary management and financial intermediation, banking sector, agriculture and industry are also covered by the statement.</div>
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	The 2019-20 FRBM, for example, recorded, under agriculture, total production of food grain, rice, wheat, milk, fish, and fish products. The statement ends with a section highlighting prospects for the economy in the future.<br />
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	<strong>Read full&nbsp;Macro-Economic Framework Statement</strong><br />
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	<a href="https://bsmedia.business-standard.com/_media/bs/data/general-file-upload/2020-02/frbm1.pdf" target="_blank">Macro-Economic Framework Statement 2020-21</a></div>

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What is Macro-economic framework statement, Macro-economic framework statement Definition

Macro-economic framework statement

What is Macro-economic framework statement

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	The Medium-term Fiscal Policy Statement, presented to Parliament under Section 3(2) of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, sets out three-year rolling targets for four specific fiscal indicators in relation to gross domestic product (GDP) at market prices &mdash; (i) Revenue Deficit, (ii) Fiscal Deficit, (iii) Tax to GDP ratio and (iv) Total outstanding Debt at the end of the year. The statement includes the underlying assumptions, an assessment of sustainability relating to balance between revenue receipts and revenue expenditure and the use of capital receipts, including market borrowings for generation of productive assets.</div>
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	In Budget 2018, then finance minister Arun Jaitley did away with revenue deficit as a part of the fiscal consolidation road map. Instead, the central government debt and general government debt substituted revenue deficit as a more accurate indicator of fiscal trajectory.&nbsp;</div>
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	The Interim Budget 2019-20 pegged the fiscal deficit for the year 2019-20 at 3.4 per cent of GDP. According to the Medium Term Fiscal Policy cum Fiscal Policy Strategy Statement, non-debt capital receipts on the capital side are expected to be Rs 102,508 crore in Budgeted Estimates (BE) 2019-20, indicating an increase of Rs 9,353 crore over Revised Estimates (RE) 2018-19.</div>
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	Increase in non-debt capital receipts is mostly on account of disinvestment, which is budgeted at Rs 90,000 crore. Total net borrowings in 2019-20 are projected at Rs 703,999 crore, compared with Rs 634,398 crore in RE 2018-19. This reflects an increase of 11 per cent over the RE.</div>

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What is Medium-term Fiscal Policy Statement, Medium-term Fiscal Policy Statement Meaning, and Definition

Medium-term Fiscal Policy Statement

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	Fiscal policy, in simple terms, is an estimate of taxation and government spending that impacts the economy.</div>
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	<strong>Types of fiscal policy</strong></div>
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	There are two types of fiscal policy:</div>
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	<strong>Expansionary fiscal policy:</strong> This policy is designed to boost the economy. It is mostly used in times of high unemployment and recession. It leads to the government lowering taxes and spending more, or one of the two. The aim is to stimulate the economy and ensure consumers&#39; purchasing power does not weaken.</div>
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	<strong>Contractionary fiscal policy: </strong>As the term suggests, this policy is designed to slow economic growth in case of high inflation. The contractionary fiscal policy raises taxes and cuts spending.</div>
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	<strong>What are the tools of fiscal policy?</strong></div>
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	There are two key tools of the fiscal policy:</div>
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	<strong>Taxation:</strong> Funds in the form of direct and indirect taxes, capital gains from investment, etc, help the government function. Taxes affect the consumer&#39;s income and changes in consumption lead to changes in real gross domestic product (GDP).</div>
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	<strong>Government spending: </strong>It includes welfare programmes, government salaries, subsidies, infrastructure, etc. Government spending has the power to raise or lower real GDP, hence it is included as a fiscal policy tool.</div>
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	<strong>Fiscal policy objectives</strong></div>
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	Some of the key objectives of fiscal policy are economic stability, price stability, full employment, optimum allocation of resources, accelerating the rate of economic development, encouraging investment, and capital formation and growth.</div>
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	<strong>Who sets fiscal policy?</strong></div>
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	In India, the Union finance minister formulates the fiscal policy.</div>
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	<strong>What is the importance of fiscal policy?</strong></div>
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	Fiscal policy is a crucial part of the economic framework. In India, it plays a key role in elevating the rate of capital formation, both in the public and private sectors.</div>
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	The fiscal policy helps mobilise resources for financing projects. The central theme of fiscal policy includes development activities like expenditure on railways, infrastructure, etc. Non-development activities include spending on subsidies, salaries, pensions, etc. It gives incentives to the private sector to expand its activities.</div>
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	Fiscal policy aims to minimise income and wealth inequalities. Income tax is charged on all salaried persons directly proportioned to their income. Likely indirect taxes are also more in the case of semi-luxury and luxury items than that of necessary consumable items. In this way, the government generates a good amount of revenue and that also leads to a reduction in wealth inequalities.</div>
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	A prudent fiscal policy stabilises price and helps control inflation.</div>
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	Fiscal policy planning gives the larger chunk of funds for regional development so as to achieve a balanced regional development. It aims to reduce the deficit in the balance of payment.</div>
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	<strong>Difference between monetary policy and fiscal policy</strong></div>
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	Monetary policy is concerned with the management of interest rates and the total supply of money in circulation. It is generally carried out by the RBI.</div>
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	Fiscal policy, on the other hand, estimates taxation and government spending. It should ideally be in line with the monetary policy, but since it is created by lawmakers, people&#39;s interest often takes precedence over growth.</div>

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What is Fiscal policy, Fiscal policy Definition, Fiscal policy News

Fiscal Policy

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	The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, establishes financial discipline to reduce fiscal deficit.</div>
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	<strong>When was the FRBM Act enacted? Who introduced it in India?</strong></div>
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	The FRBM Bill was introduced by the then finance minister, Yashwant Sinha, in 2000. The Bill, approved by the Union Cabinet in 2003, became effective from July 5, 2004.</div>
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	<strong>What are the objectives of the FRBM Act?</strong></div>
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	The FRBM Act aims to introduce transparency in India&#39;s fiscal management systems. The Act&rsquo;s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India. The FRBM Act was enacted to introduce more equitable distribution of India&#39;s debt over the years.</div>
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	<strong>Key features of the FRBM Act</strong></div>
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	The FRBM Act made it mandatory for the government to place the following along with the Union Budget documents in Parliament annually:</div>
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	<strong>1. </strong>Medium Term Fiscal Policy Statement</div>
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	<strong>2. </strong>Macroeconomic Framework Statement</div>
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	<strong>3. </strong>Fiscal Policy Strategy Statement</div>
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	The FRBM Act proposed that revenue deficit, fiscal deficit, tax revenue and the total outstanding liabilities be projected as a percentage of gross domestic product (GDP) in the medium-term fiscal policy statement.</div>
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	<strong>FRBM Act exemptions</strong></div>
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	On grounds of national security, calamity, etc, the set targets of fiscal deficits and revenue could be exceeded.</div>
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	<strong>How effective has the FRBM Act been?</strong></div>
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	Several years have passed since the FRBM Act was enacted, but the Government of India has not been able to achieve targets set under it. The Act has been amended several times.</div>
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	In 2013, the government introduced a change and introduced the concept of effective revenue deficit. This implies that effective revenue deficit would be equal to revenue deficit minus grants to states for the creation of capital assets. In 2016, a committee under N K Singh was set up to suggest changes to the Act. According to the government, the targets set under FRBM Act previously were too rigid.</div>
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	<strong>N K Singh Committee&#39;s recommendations were as follows:</strong></div>
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	<strong>Targets:</strong> The committee suggested using debt as the primary target for fiscal policy and that the target must be achieved by 2023.</div>
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	<strong>Fiscal Council:</strong> The committee proposed to create an autonomous Fiscal Council with a chairperson and two members appointed by the Centre (not employees of the government at the time of appointment)</div>
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	<strong>Deviations:</strong> The committee suggested that the grounds for the government to deviate from the FRBM Act targets should be clearly specified</div>
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	<strong>Borrowings:</strong> According to the suggestions of the committee, the government must not borrow from the RBI, except when...</div>
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	<strong>a.</strong> the Centre has to meet a temporary shortfall in receipts</div>
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	<strong>b.</strong> RBI subscribes to government securities to finance any deviations</div>
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	<strong>c. </strong>RBI purchases government securities from the secondary market<br />
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	<strong>Read full FRBM documents</strong></div>
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	<br />
	<div>
		<a href="https://bsmedia.business-standard.com/_media/bs/data/general-file-upload/2020-02/frbm1.pdf" target="_blank">Macro-Economic Framework Statement 2020-21</a></div>
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	<div>
		<a href="https://bsmedia.business-standard.com/_media/bs/data/general-file-upload/2020-02/frbm2.pdf" target="_blank">Medium Term Fiscal Policy Cum Fiscal Policy Strategy Statement&nbsp; 2020-21</a></div>
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