Fiscal Responsibility and Budget Management (FRBM) Act, 2003-1

•The FRBM Act was enacted by the Parliament in 2003 to institutionalize fiscal discipline, reduce fiscal deficit, and improve macroeconomic management.
•The government was supposed to wipe out revenue deficit and cut fiscal deficit to 3% of GDP by 2008-09, thus bringing much needed fiscal discipline.
•Fiscal deficit is the total expenditure excluding revenue receipts, loan recoveries and receipts from disinvestment etc. It is a measure of the government borrowing in a year.
•The Act applies only to the central government and the States have to enact suitable legislation to adopt the rules under the FRBM Act.
•The implementation of the Act was put on hold in 2007-08 due to the global financial crisis and the need for fiscal stimulus.
•In 2012, the FRBM Act was amended and it was decided that the FRBM Act would target an effective revenue deficit in place of revenue deficit.
•Effective revenue deficit excludes capital expenditure from revenue deficit and thus provides space to the government to spend on formation of capital assets.