Fiscal Responsibility and Budget Management (FRBM) Act, 2003-2

•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.
•In 2017, the FRBM Review Committee headed by former Revenue Secretary, NK Singh submitted its report to the Central Government. Few important recommendations being-
•A debt to GDP ratio of 60% should be targeted with a 40% limit for the centre and 20% limit for the states;
•Creation of an autonomous Fiscal Council;
•An “escape clause”, i.e. the government can deviate from the targets in case of a national calamity, national security, etc.
•The government used an escape route in its Budget for FY20, by taking a deviation of 0.5 percentage points from the fiscal deficit targets set out earlier.
•During the presentation of the Budget 2020-21, the government fixed the fiscal deficit target for the year 2020-21 at 3.5% of the GDP.