FRBM 2.0

Fiscal prudence is about the quality of expenditure, not just quantity

A committee to review the Fiscal Responsibility and Budget Management Act (FRBM) has suggested steep targets for achieving fiscal rectitude by the Central and state governments. A key recommendation is to move towards using public debt-to-GDP (gross domestic product) as the main variable to map fiscal performance. The committee, after running several tests and looking at the global norm, has settled at a 60 per cent debt-to-GDP ratio as the anchor, to be achieved by 2022-23. At present, India’s debt-to-GDP ratio is around 68 per cent, which makes India one of the most indebted economies among the emerging ones. In