The Fiscal Responsibility and Budget Management Act, 2003

(1) This Act may be called the Fiscal Responsibilityand Budget Management Act, 2003. (2) It extends to the whole of India. (3) It shall come into force on such date1as the Central Government may, by notification in theOfficial Gazette, appoint in this behalf.

In this Act, unless the context otherwise requires,-- (a) "fiscal deficit" means the excess of total disbursements, from the Consolidated Fund of India,excluding repayment of debt, over total receipts into the Fund (excluding the debt receipts), during afinancial year; 1[2[(aa) "Central Government debt" at any date means-- (i) the total outstanding liabilities of the Central Government on the security of theConsolidated Fund of India, including external debt valued at current exchange rates; (ii) the total outstanding liabilities in the public account of India; and (iii) such financial liabilities of any body corporate or other entity owned or controlled bythe Central Government, which the Government is to repay or service from the annual financialstatement, reduced by the cash balance available at the end of that date;] (b) "fiscal indicators" means the measures such as numerical ceilings and proportions to grossdomestic product, as may be prescribed, for evaluation of the fiscal position of the CentralGovernment; 1[3[(bb) "general Government debt" means the sum total of the debt of the Central Governmentand the State Governments, excluding inter-Governmental liabilities;] 4[(bc) "gross domestic product" means the sum of the gross value added by all residentproduction units plus that part of taxes, less subsidies, on products, which is not included in thevaluation of output, during a financial year, reckoned at current market prices, as published by theCentral Statistics Office from time to time;] (c) "prescribed" means prescribed by rules made under this Act; 4[(ca)"real gross domestic product" means gross domestic product, reckoned at constant prices,as published by the Central Statistics Office from time to time; (cb) "real output growth" means growth in real gross domestic product;] (d) "Reserve Bank" means the Reserve Bank of India constituted under sub-section (1) ofsection 3 of the Reserve Bank of India Act, 1934 (2 of 1934); 5* * * * *

(1) The Central Government shall lay ineach financial year before both Houses of Parliament the following statements of fiscal policy along withthe annual financial statement and 1[demands for grants except the Medium-term Expenditure FrameworkStatement,] namely:-- (a) the Medium-term Fiscal Policy Statement; (b) the Fiscal Policy Strategy Statement; (c) the Macro-economic Framework Statement; 2[(d) the Medium-term Expenditure Framework Statement.] 2[(1A) The statements referred to in clauses (a) to (c) of sub-section (1) shall be followed up with theMedium-term Expenditure Framework Statement with detailed analysis of underlying assumptions. (1B) The Central Government shall lay the Medium-term Expenditure Framework Statement referredto in clause (d) of sub-section (1) before both Houses of Parliament, immediately, following the sessionof Parliament in which the policy statements referred to in clauses (a) to (c) were laid under sub-section(1).] (2) The Medium-term Fiscal Policy Statement shall set forth a three-year rolling target for prescribedfiscal indicators with specification of underlying assumptions. (3) In particular, and without prejudice to the provisions contained in sub-section (2), theMedium-term Fiscal Policy Statement shall include an assessment of sustainability relating to-- 3* * * * * (ii) the use of capital receipts including market borrowings for generating productive assets. (4) The Fiscal Policy Strategy Statement shall, inter alia, contain-- (a) the policies of the Central Government for the ensuing financial year relating to taxation,expenditure, market borrowings and other liabilities, lending and investments, pricing of administeredgoods and services, securities and description of other activities such as underwriting and guaranteeswhich have potential budgetary implications; (b) the strategic priorities of the Central Government for the ensuing financial year in the fiscalarea; (c) the key fiscal measures and rationale for any major deviation in fiscal measures pertaining totaxation, subsidy, expenditure, administered pricing and borrowings; (d) an evaluation as to how the current policies of the Central Government are in conformity withthe fiscal management principles set out in section 4 and the objectives set out in the Medium-termFiscal Policy Statement. (5) The Macro-economic Framework Statement shall contain an assessment of the growth prospectsof the economy with specification of underlying assumptions. (6) In particular and without prejudice to the generality of the foregoing provisions the MacroeconomicFramework Statement shall contain an assessment relating to-- (a) the growth in the gross domestic product; (b) the fiscal balance of the Union Government as reflected in the 4*** gross fiscal balance; (c) the external sector balance of the economy as reflected in the current account balance of thebalance of payments. 5[(6A) (a) The Medium-term Expenditure Framework Statement shall set forth a three-year rollingtarget for prescribed expenditure indicators with specification of underlying assumptions and riskinvolved. (b) In particular and without prejudice to the provisions contained in clause (a), the Medium-termExpenditure Framework Statement shall, inter alia, contain-- (i) the expenditure commitment of major policy changes involving new service, newinstruments of service, new schemes and programmes; (ii) the explicit contingent liabilities, which are in the form of stipulated annuity paymentsover a multi-year time-frame; 6* * * * * (7) The Medium-term Fiscal Policy Statement, 7[the Fiscal Policy Strategy Statement, the MediumtermExpenditure Framework Statement] and the Macro-economic Framework Statement referred to insub-section (1) shall be in such form as may be prescribed.

1[4. Fiscal management principles.--(1) The Central Government shall,-- (a) take appropriate measures to limit the fiscal deficit upto three per cent. of gross domesticproduct by the 31st March, 2021; (b) endeavour to ensure that-- (i) the general Government debt does not exceed sixty per cent.; (ii) the Central Government debt does not exceed forty per cent., of gross domestic product by the end of financial year 2024-2025; (c) not give additional guarantees with respect to any loan on security of the Consolidated Fund ofIndia in excess of one-half per cent. of gross domestic product, in any financial year; (d) endeavour to ensure that the fiscal targets specified in clauses (a) and (b) are not exceeded afterstipulated target dates. (2) The Central Government shall prescribe the annual targets for reduction of fiscal deficit for theperiod beginning from the date of commencement of Part XV of Chapter VIII of the Finance Act, 2018and ending on the 31st March, 2021: Provided that exceeding annual fiscal deficit target due to ground or grounds of national security, actof war, national calamity, collapse of agriculture severely affecting farm output and incomes, structuralreforms in the economy with unanticipated fiscal implications, decline in real output growth of a quarterby at least three per cent. points below its average of the previous four quarters, may be allowed for thepurposes of this section. (3) Any deviation from fiscal deficit target under sub-section (2) shall not exceed one-half per cent. ofthe gross domestic product in a year. (4) The Central Government shall, in case of increase in real output growth of a quarter by at leastthree per cent. points above its average of the previous four quarters, reduce the fiscal deficit by at leastone-quarter per cent. of the gross domestic product in a year. (5) Where the fiscal deficit is allowed to vary from the target prescribed under the proviso tosub-section (2) or deviation is initiated under sub-section (4), a statement explaining the reasons thereofand the path of return to annual prescribed targets under this section shall be laid, as soon as may be,before both the Houses of Parliament.]

(1) The Central Government shall not borrow from the ReserveBank. (2) Notwithstanding anything contained in sub-section (1), the Central Government may borrow fromthe Reserve Bank by way of advances to meet temporary excess of cash disbursement over cash receiptsduring any financial year in accordance with the agreements which may be entered into by thatGovernment with the Reserve Bank: Provided that any advances made by the Reserve Bank to meet temporary excess cash disbursementover cash receipts in any financial year shall be repayable in accordance with the provisions contained insub-section (5) of section 17 of the Reserve Bank of India Act, 1934(2 of 1934). 1[(3) Notwithstanding anything contained in sub-section (1), the Reserve Bank may subscribe to theprimary issues of Central Government Securities due to ground or grounds specified in the proviso to subsection(2) of section 4.] (4) Notwithstanding anything contained in sub-section (1), the Reserve Bank may buy and sell theCentral Government securities in the secondary market 2[or converts Central Government Securities heldby it with other Securities of the Central Government as mutually agreed between the Reserve Bank andthe Central Government].