Consider the following statements about the main features of the FRBMA:
(A) A quarterly review of the trends in receipts and expenditure in relation to the budget is to be placed before both Houses of Parliament.
(B) The revenue deficit is to be reduced by 0.3 per cent of GDP each year.
(C) The Reserve Bank of India must not subscribe to the primary issues of central government securities from the year 2006-07.
(D) After the revenue deficit is eliminated, the central government is to build up an adequate revenue surplus.
(E) The central government may borrow from the RBI by way of advances to meet a permanent excess of cash disbursements over cash receipts.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (C) and (D) only
The FRBMA set targets for the deficits and limits on borrowing from the RBI.
(A) A quarterly review of the trends in receipts and expenditure in relation to the budget is to be placed before both Houses of Parliament. — Correct. Parliament gets a quarterly review of receipts and expenditure.
(B) The revenue deficit is to be reduced by 0.3 per cent of GDP each year. — Incorrect. The yearly cut is 0.5 per cent for the revenue deficit; 0.3 per cent is for the fiscal deficit.
(C) The Reserve Bank of India must not subscribe to the primary issues of central government securities from the year 2006-07. — Correct. From 2006-07 the RBI may not buy central government securities when they are first issued.
(D) After the revenue deficit is eliminated, the central government is to build up an adequate revenue surplus. — Correct. Once the revenue deficit is eliminated, the Act asks for an adequate revenue surplus.
(E) The central government may borrow from the RBI by way of advances to meet a permanent excess of cash disbursements over cash receipts. — Incorrect. Advances are allowed only for a temporary excess.
NCERT (2026-27): “Main Features 1. The Act mandates the central government to take appropriate measures to reduce fiscal deficit to not more than 3 percent of GDP and to eliminate the revenue deficit by March 31, … and thereafter build up adequate revenue surplus.” “2. It requires the reduction in fiscal deficit by 0.3 per cent of GDP each year and the revenue deficit by 0.5 per cent. If this is not achieved through tax revenues, the necessary adjustment has to come from a reduction in expenditure.” “4. The central government shall not borrow from the Reserve Bank of India except by way of advances to meet temporary excess of cash disbursements over cash receipts.” “5. The Reserve Bank of India must not subscribe to the primary issues of central government securities from the year 2006-07.” “8. Quarterly review of the trends in receipts and expenditure in relation to the budget be placed before both Houses of Parliament.” |