What is in news : The BBMP will soon be brought under the ambit of a act in line with Fiscal Responsibility and Budget Management Act to ensure financial discipline

What is Fiscal Discipline: A method that envisages balance between the Government expenditure and revenue in an economy

Why is it important:

• If not maintained, it can lead to depreciation of currency and inflation in the economy
• Will help in maintaining an overall stability in the economy

How is it brought :

• Measures of FISCAL POLICY
• In India – Budget

About FRBM

• Was enacted in August 2003.
• Aims to make the Central government responsible for ensuring inter-generational equity in fiscal management and long-term macro-economic stability.
• Envisages the setting of limits on the Central government’s debt and deficits.
• Limited the fiscal deficit to 3% of the GDP.
• Ensure that the States too are financially prudent, the 12th Finance Commission’s recommendations in 2004 linked debt relief to States with their enactment of similar laws.
• States have since enacted their own respective Financial Responsibility Legislation, which sets the same 3% of Gross State Domestic Product (GSDP) cap on their annual budget deficits.
• Mandates greater transparency in fiscal operations of the Central government and the conduct of fiscal policy in a medium-term framework.
• Budget of the Union government includes a Medium Term Fiscal Policy Statement that specifies the annual revenue and fiscal deficit goals over a three-year horizon.
• Rules for implementing the Act were notified in July 2004.
• Rules were amended in 2018, and most recently to the setting of a target of 3.1% for March 2023.
• The NK Singh committee (set up in 2016) recommended that the government should target a fiscal deficit of 3% of the GDP in years up to March 31, 2020 cut it to 2.8% in 2020-21 and to 2.5% by 2023.