18.18        ndian    onom
           (i) GoI to take measures to reduce fiscal and    their FRAs (fiscal responsibility acts) in the
               revenue deficit so as to eliminate revenue   forthcoming years. Both of the governments have
               deficit by 31 March, 2008 (which was         shown better fiscal disciplines since then43. To the
               revised by the UPA Government to             extent ‘exact’ follow-up to the FRBMA-linked
               March 31, 2009) and thereafter build up      targets are concerned, the performance has been
               adequate revenue surplus.                    mixed. The targets were exceeded many times
          (ii) Rules to be made under the Act to specify    due to fiscal escalations (either due to natural
               annual targets for the reduction of fiscal   calamities or on exceptional ground), while many
               deficit (FD) and revenue deficit (RD)        times they were better than the mandated targets,
               contingent liabilities and total liabilities too. But this act brought the element of higher
               (RD to be cut by 0.5 per cent per annum      fiscal discipline among the governments, there is
               and FD by 0.3 per cent per annum).           no doubt in it44.
         (iii) FD and RD may exceed the targets only             In the past few years a view has emerged as
               on the grounds such as national security,    per which binding the government expenditures
               calamity or on exceptional grounds.          to a fixed number may be counterproductive
         (iv) GoI not to borrow from RBI except by          to the economy at large. Due to a hard and fast
               Ways and Means Advances (WMAs).              discipline regarding fiscal targets, some highly
          (v) RBI not to subscribe to the primary issue     desirable expenditures by the government may
               of the GoI securities from 2006–07 (it       get blocked, for example—expenditures on
               means that these government bonds/           infrastructure, welfare, etc. This is why we find a
               papers will become market—based              changed stance of the Government of India in the
               instrument to raise long-term funds by       Union Budget 2016–17 regarding the follow-up
               the government).                             to the FRBMA. Terming it a new school of thought
                                                            the Budget suggests two important changes in its
         (vi) Steps to be taken to ensure greater
                                                            fiscal road map:
               transparency in fiscal operations.
                                                                  (i) It may be better to have a fiscal deficit range
        (vii) Along with the Budget and Demands for
                                                                        as the target in place of a fixed number as
               Grants, the GoI to lay the following three
                                                                        target. This would give necessary policy
               statements before the Parliament in each
                                                                        space to the government to deal with
               financial year:
                                                                        dynamic situations.
               (a) Fiscal Policy Strategy Statement
                                                                (ii) A need is felt to align fiscal expansion or
                                                                        contraction with credit contraction or
               (b) Medium Term Fiscal Policy
                                                                        expansion respectively, in the economy.
                   Statement (MTFPS); and
                                                                 In the opinion of the Budget, the government
               (c) Macroeconomic Framework
                                                            should remain committed to fiscal prudence
                   Statement (MFS).
                                                            and consolidation but a time has come when
       (viii) The Finance Minister to make quarterly        the working of the FRBMA needs a review—
               review of trends in receipts and             especially in the context of the uncertainty and
               expenditure in relation to the Budget and
               place the review before the Parliament.        43.    Economic Survey 2013–14; 2014–15 and 2015–16.
                                                              44.    The acceptance to the recommendations of the 13th
     Recent changes: After the enactment of the                      and 14th Finance Commissions by the Government
     FRMBA, the states also followed the suit passing                of India in this regard have been highly effective.