FISCAL RESPONSIBILITY AND BUDGET MANGEMENT

8/7/2019 FISCAL RESPONSIBILITY AND BUDGET MANGEMENT

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48

The Fiscal Responsibility and Budget

Management Bill

2.40 The Committee on Fiscal Responsibility

Legislation was constituted on 17th January,

2000 to go into various aspects of the fiscal

system and recommend a draft legislation on

fiscal responsibility. This was followed by an

announcement in the Budget 2000-2001 for a

strong institutional mechanism embodied in a

Fiscal Responsibility Act and to bring the

necessary legislative proposals to the House

during the course of the year. Accordingly the

Fiscal Responsibility and Budget Management

Bill, 2000 was introduced in Lok Sabha in

December, 2000.

2.41 The proposed law casts an obligation

on the Government itself to strengthen the

institutional framework for conduct of prudent

and accountable fiscal policy and pave the way

for promoting greater macro-economic stability.

The proposed Fiscal Responsibility and Budget

Management legislation will provide a legal and

institutional framework to bring down the fiscal

deficit, contain the growth of public debt and

stabilise debt as a proportion of GDP over the


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medium term. It binds future governments to a

pre-specified path of fiscal consolidation. This

c o v e r s o n l y t h e f i n a n c e s o f t h e Ce n t r a l

Government. The matter regarding similar

legislation at State level will be for State

Governments to pursue. The Bill proposes

elimination of revenue deficit and progressive

reduction of the fiscal deficit to not more than

2 per cent of gross domestic product within a

period of five financial years following the

promulgation of the law. Besides, the proposed

Bill contains provisions which will ensure

f l e x i b i l i t y i n f i s c a l m a n a g e m e n t u n d e r

e x t r a o r d i n a r y c i r c ums t a n c e s l i k e n a t u r a l

calamities and war. Under borrowing related

principles, it is proposed to prohibit certain types

of borrowing from the Reserve Bank of India.

The Bill envisages that within a period of ten

financial years, the total liabilities (including

external debt at current exchange rate) do not

exceed fifty per cent of the estimated gross

d o m e s t i c p r o d u c t . T h e s a l i e n t f e a t u r e s

of the proposed legislation are given in the

Box 2.5.49

BOX 2.5

The Fiscal Responsibility and Budget Management Bill, 2000


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The Important features of the Bill, inter alia, provide as under:

! Laying before both Houses of Parliament, along with the annual Budget in each

financial year the following

statements of fiscal policy: (a) Medium-term Fiscal Policy Statement; (b) Fiscal

Policy Strategy statement and;

(c) Macro-economic Framework Statement.

! The Medium-term Fiscal Policy Statement shall set-forth a three-year rolling target

for prescribed fiscal

indictors with specification of underlying assumptions. Besides, the Medium-term

Fiscal Policy Statement

shall include an assessment of sustainability relating to: (i) the balance between

revenue receipts and

revenue expenditures and; (ii) the use of capital receipts including market

borrowings for generating productive

assets.

! 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 ofadministered goods and

services, securities and description of other activities, such as, underwriting and

guarantees which have

potential budgetary implications;

(b) the strategic priorities of the Central Government for the ensuing financial year

in the fiscal area;

(c) the key fiscal measures and rationale for any major deviation in fiscal measures

pertaining to taxation,

subsidy, expenditure, administered pricing and borrowings;

(d) an evaluation as to how the current policies of the Central Government are in

conformity with the fiscal


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management principles set out in Fiscal Policy Strategy Statement and the

objectives set out in the

Medium-term Fiscal Policy Statement.

! The Central Government shall take appropriate measures to eliminate the revenue

deficit, bring down the

fiscal deficit and build up adequate revenue surplus and in particular shall:

(a) reduce revenue deficit by an amount equivalent to one-half per cent, or more of

the estimated gross

domestic product at the end of each financial year beginning on the 1st day of April,

2001;

(b) reduce revenue deficit to nil within a period of five financial years beginning

from the initial financial year

on the 1st day of April,2001 and ending on the 31st day of March 2006;

(c) build up surplus amount of revenue and utilise such amount for discharging

liabilities in excess assets;

(d) reduce fiscal deficit by an amount equivalent to one-half per cent or more of the

estimated gross domestic

product at the end of each financial year beginning on the 1st day of April, 2001;

(e) reduce fiscal deficit for a financial year to not more than two per cent of theestimated gross domestic

product for that year, within a period of five financial years beginning from the

initial financial year on the

1st day of April, 2001 and ending on the 31st day of March 2006;

(f) not give guarantee for any amount exceeding one-half per cent of the estimated

gross domestic product

in any financial year and;

(g) ensure within a period of ten financial years, beginning from the initial financial

year on the 1st day of

April,2001, and ending on the 31st day of March, 2011, that the total liabilities

(including external debt


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at current exchange rate) at the end of a financial year, do not exceed fifty per cent

of the estimated gross

domestic product for that year.

! Prohibition of direct borrowings by the Central Government from the Reserve Bank

of India after three years

except by way of advances to meet temporary cash needs in certain circumstances.

! Central Government to take suitable measures to ensure greater transparency in

fiscal operations and to

minimization of, as far as practicable, secrecy in the preparation of the annual

budget.

! Quarterly review of the trends in receipts and expenditures in relation to the

budget by the Finance Minister

and placing the outcome of such reviews before both Houses of Parliament.

! The Central Government to cut expenditure authorizations in a proportionate

manner, while protecting the

charged expenditure, whenever there is a shortfall of revenue or excess of

expenditure over specified targets.

! Finance Minister to make a statement in both Houses of Parliament explaining any

deviation in meeting the

obligations cast on the Central Government under this Act and the remedial

measures the Central Government

proposes to take.

! Relaxation from deficit reduction targets to deal with unforeseen demands on the

finances of the Central

Government on account of national security or natural calamities of national

dimension.1

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At last the Lok Sabha has passed the Fiscal Responsibility and Budget Management Bill. There is a consensus

among observers that it is a watered-down version of the original intentions. Explicit targets for the reduction of the

fiscal and revenue deficits as well as the ceiling on government borrowing have been removed from the draft.

It was originally envisaged that there should be a cap on public debt at 50 per cent of Gross Domestic

Product. Instead of mandating a half per cent cut in deficits annually, the revised version says that the government

should undertake appropriate measures to eliminate revenue deficit by March 31,2008 and let the targets to be set for

annual reduction in fiscal and revenue deficits remain till then.
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As could be expected, there is an enabling clause to escape from the rigours of the discipline on grounds of national

calamity, security or other exceptional circumstances. However, there is an important provision, which has been

retained from the original. The Bill seeks to bar the Reserve Bank of India [ Get Quote ] from operating in the primary

market for government securities from April 1, 2006.

However, it could lend to the government directly in case of exceptional situations like natural calamities. It also

prohibits direct borrowing by the Centre from the RBI except for meeting temporary cash needs. A parliamentary

committee, which also has members from the Opposition parties, diluted the draft Bill.

Is it because of foresight that the draft law may be a nuisance to future governments formed by the opposition? The

foresight is commendable but for wrong reasons! An anti-climax of the legislation is the clause, made by way of

abundant caution, that no civil court will have jurisdiction to question the legality of any action or decision taken by the

Government under the Act, if and when passed.

It is perhaps an index of the lack of seriousness in implementing the reform. The Act will be on par with the

Directive Principles of State Policy in the Constitution, which are not justiciable.

The experience with debt ceilings in the US are not encouraging. It was introduced first during World War I at $11.5

bn. It rose to $300 bn during the next World War. In the eighties of the last century, the Congress had to raise it

several times during a year. The Act of October 13,1984 established the debt limit at $1,823,800 million.

Subsequently there were further increases. During the current tenure of President Bush Jr. the limit was raised by

$450 bn to $6,399,975,000,000 -- or approximately $6.4 trillion -- a few months ago.

The limit was being reached in February this year. Hence the US Treasury sought a further increase arguing that any

default in payment of bills would result in international repercussions, unsettling bond markets, driving up interest

rates and weakening the world economy.

After wrangling over the President's proposals for the next fiscal, the House of Representatives passed a

compromise budget and sent a bill to the Senate, raising the ceiling to $7.38 trillion. The Senate is yet to vote but

one may safely assume that it will be passed.

The experience of the US shows that, despite a strong lobby existing both in the Congress and among the public

against debt, the ceiling has been merrily raised from time to time, making a mockery of the law. In India the public is

least concerned with the matter and Parliamentarians have more important and urgent issues on their agenda.

As James Clarke said: "A politician thinks of the next election; a statesman thinks of the next generation." Thus any

ceiling in India, if ever prescribed, would meet the same fate as in the US. Recently Alan Greenspan, President of

the Federal Reserve System, said at a House hearing that such official ceilings did nothing to force deficit

reduction.

But one salient aspect of the foreign experience is that every time the US government had to seek approval of a raise

in the ceiling there was a national debate and it was put on the defensive. During President Clinton's time some

government establishments were closed for a few days because there was no money to pay the staff!
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On the other hand, in India the growth of debt goes on without any questions being asked. Even the Appropriations

and Demand for Grants have no sanctity. How else can one explain the phenomenon of both the Centre and the

states approaching the legislatures to 'regularise' excess spending after the event?

One has no hope of the deficits coming down in the near future. The finance minister has said that a half of revenues

goes towards interest payments. If one adds 'holy cows' like subsidies and defence, and those charged on the

Consolidated Fund of India (in addition to interest) the leeway for any cut down in expenditure is limited.

The country is caught in an internal debt trap as it borrows even to pay interest. It is like being in quicksand where

the more you try to get out the more you sink in. The only hope is in raising revenues. What is lacking is the political

will to enforce tax laws. Even with the existing rates of income-tax there is a mine of revenue waiting to be tapped if

only efforts are made to nab tax-evaders, especially in big cities.

As regards the ban on borrowing by the government from the RBI, it is a welcome feature. There is such a prohibition

in the US too. But there is no ways and means arrangement there. It is quite likely that it will continue in India even

under the new dispensation, given the rider to the Bill.

The autonomy of the Federal Reserve System ensures that there is a counterbalancing force to meet fiscal

profligacy. In the US, fiscal loosening in the past was neutralised by a tightening monetary policy against the wishes

of the government. Would it work in India in the absence of central bank autonomy? I am not sure.

As it is, there is a provision in the Bill for the the Government to access the monetary tap of the RBI. Even otherwise

an obliging RBI can easily find ways to help the Government. If the market conditions are tight and a new issue of

securities is likely to face difficulties, the central bank can exercise 'moral suasion' (of the wrong type!) on the system.

Banks may be informally asked to purchase the new issues on the understanding that the RBI will buy them back in

the secondary market soon, thus releasing the funds.2

The Indian Economy

Centre for Civil Society 399

Fiscal Responsibility and Budget

Management Bill 2000

Shruti Rajagopalan

Physicians say of consumption, that in the early stages of this disease it is easy to cure

but difficult to diagnose; whereas later on, if it has not been recognized and treated at the

beginning, it becomes easy to diagnose and difficult to cure. The same thing happens in

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affairs of State.

Machiavelli

The Fiscal Responsibility and Budget Management Bill 2003, the most recent attempt at controlling fiscal

profligacy, has been passed in the Lok Sabha after a lot of debate. The FRBMB 2000 covers wide ground,

has numerous angles, dimensions and levels to it. To assess the various measures in the FRBMB, it might

be useful to divide its provisions into four categories -- legal statutes, accounting stipulations, numerical

targets and ceilings for deficit measures. The implementation of rules to cut spending and/or raise taxes

when deficit targets (triggers) are reached, are also included in the measures.

The Bill introduced in December 2000 specified that the Centre should lay annual statements on

the medium-term fiscal policy, fiscal policy strategy and macro-economic framework before both Houses

of Parliament. In its original form, the Bill sought the elimination of revenue deficit by the end of 2005-06

and proposed reduction in the fiscal deficit to 2 per cent of the gross domestic product. It also prohibited

borrowing by the Centre from the Reserve Bank of India after 3 years except by way of advances to meet

temporary cash needs in certain circumstances. The Bill had proposed a cap on government guarantees at

0.5 per cent of the GDP in any financial year and restricting the annual liabilities to less than 50 per cent

of the GDP every year for 10 years beginning 2001. According to the Bill introduced in 2000, the

government was to reduce the revenue deficit by 0.5 percentage points or more of the estimated GDP

every year reducing it to nil by March 31, 2006.

The Bill however has been debated in the Lok Sabha since December 2000 and some of its most

effective and important clauses have been diluted. The objective of this study is to look at the original and

diluted version of the Bill and compare them with measures other countries use to achieve fiscal

responsibility.

Experience reveals different approaches to fiscal responsibility legislation. In particular, it is

important to distinguish fiscal responsibility legislation that establishes certain reporting standards from

that which sets specific fiscal targets and that which involves some combination of both approaches.

Autonomy of Central Bank and Accounting Transparency are a few clauses that come up in this context.


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In India, we have shifted from one approach of fiscal legislation top another, specifying fiscal targets in

the former and establishing certain standards in the latter. Due to such a shift, we may end up achieving

the objectives of neither.

In the paper, we will track down the bill passed in Lok Sabha and its effectiveness. Alongside

understand three different approaches towards fiscal discipline. New Zealand with broad prudential

measures establishing certain reporting standards, United States with its various legislations, none of

which were as effective as desired and the European Union which used its joint currency as a measure to

bring about fiscal discipline. The Indian Economy


Why we require such legislation?

The Central Government has been borrowing endlessly from the Reserve Bank of India and its internal

debt is among the highest in the world. World Bank says that India has less External debt than most

others, with a Debt-GDP ratio of only 20.6. In terms of high Central budgetary deficit in 1997, India

ranked tenth, after Greece, Turkey and Pakistan, among others. High deficits at the State Government

levels have further compounded the problem. According to the IMF, Weak revenue performance and

lack of expenditure control at both the central and state government levels caused the consolidated deficit

of the public sector to rise sharply to around 11 per cent of GDP in FY 1999/00, with public sector debt

exceeding 80 per cent of GDP. The deficit and debt has attracted focused attention with the introduction

of the Fiscal Responsibility and Budget Management Bill in the Lok Sabha in December 2000. Five aspects

of the deficit problem have attracted attention. First, is the deficit itself, which is a large proportion of GDP.

Second, is the composition of the deficit, in particular the sizable revenue deficit that goes to finance

current consumption of the government, and the primary deficit, which is the fiscal deficit less interest

payments. Third, is the growing debt, which is the accumulated deficit from the past. Fourth, is the

growing interest burden on public debt, which is an obligatory expenditure and constrains the flexibility

available with the government in resource allocation. Fifth, is the financing a part of the high deficit

through borrowings from the Reserve Bank of India.


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1

There is a widespread unanimity about the unsustainability of the current Indian fiscal stance. Mounting debt from

accumulated deficit of the past

resulted in interest expenditure of the Central Government increasing 51 times over the two decades from

1979-80. Centers interest payments of Rs. 902 Billion preempted 40 per cent of gross tax and non-tax

revenues in 1999-2000. Taking into account defense revenue expenditure, major subsidies and transfer to

States, there is nothing left after interest payment and the Center has to borrow to meet other items of

revenue expenditure. Thus, there is a desperate need for legislation on the ceiling of the expenditure of

the Central Government and to put a cap on Government borrowings.

Fiscal Responsibility Provisions in India

2

Provisions as introduced in 2000

3

Amendments

4

Effect of these

Amendments

3)Fiscal Deficit means-

a) The excess of total disbursements, from the

consolidated fund of India, excluding repayment of

debt, over total receipts into Fund, excluding debt

receipts.

b) Total expenditure of Consolidated Fund of India

(including its loans but excluding repayment of debt) over

its tax and non-tax receipts.

Fiscal Deficit means -the

excess of total


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disbursements, from the

consolidated fund of

India, excluding

repayment of debt, over

total receipts into Fund.

The definition of

fiscal deficit has

been narrowed by

excluding debt, which

is nowhere close to a

negligible figure.

4. Fiscal Management principles.-(1) The Central

Government shall respond appropriately to eliminate the

revenue deficit and fiscal deficit and build up adequate

revenue surplus.

(2) In particular, and without prejudice to the generality

of the foregoing provision, the Central Government

The Central government

shall take appropriate

steps to reduce fiscal

deficit and eliminate

revenue deficit by the 31

March 2008 and there

All the targets have

been removed to

achieve the required


13/40

deficit level and it has

been left to the whim

of the government to

1

Kannan, R., and Lahiri, Ashok. 2002. Indias fiscal deficits and their Sustainability in perspective. New

Delhi: National Institute of Public Finance and Policy.

2

Source: Fiscal Responsibility and Budget Management Bill 2000

3

Italicised text has been amended

4

Taken from Notice of AmendmentsThe Indian Economy


shall

(a) Reduce revenue deficit by an amount equivalent to

one-half per cent. Alternatively, more of the estimated

gross domestic product at the end of each financial year

beginning on the 1st day of April 2001;

(b) Reduce revenue deficit to nil within a period of five

financial years beginning from the initial financial year

on the 1st day of April 2001 and ending on the 31st day of

March 2006;

(c) Build up surplus amount of revenue and utilise such

amount for discharging liabilities in excess of assets;

(d) Reduce fiscal deficit by an amount equivalent to onehalf per cent. Alternatively, more of the estimated gross


14/40

domestic product at the end of each financial year

beginning on the 1st day of April 2001;

(e) Reduce fiscal deficit for a financial year to not more

than two per cent. of the estimated gross domestic product

for that year, within a period of five financial years

beginning from the initial financial year on the 1st day of

April, 2001 and ending on the 31st day of March, 2006:

Provided that revenue deficit and fiscal deficit may exceed

the limits specified under this sub-section due to ground

or grounds of unforeseen demands on the finances of the

Central Government due to national security or national

calamity:

Provided further that the ground or grounds specified in

the first proviso shall be placed before both Houses of

Parliament, as soon as may be, after such deficit amount

exceeded the aforesaid limits;

(f) Not give guarantee for any amount exceeding one-half

per cent. Of the estimated gross domestic product in any

financial year;

(g) Ensure within a period of ten financial years,

beginning from the initial financial year on the 1st day of

April 2001, and ending on the 31st day of March 2011,

that the total liabilities do not exceed 50% of the GDP.

after build up adequate

revenue surplus.

a) The annual targets for


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reduction of fiscal

deficit and revenue

deficit during the period

beginning with the

commencement of this

act and ending on 31

st

March 2008.

b) The annual targets

assuming contingent

liabilities in the form of

guarantees and the total

liabilities as a

percentage of GDP;

provided that the

revenue deficit ad fiscal

deficit may exceed such

targets due to grounds

of national security,

national calamity or

such other exceptional

grounds.

decide for every

financial year.

It is also not binding in

nature i.e. the Central


16/40

government can

exceed the deficit

target for the year.

Other ways in which

the government can

bypass the bill are

inherent in the bill like

in case of national

security or calamity,

whose definitions are

for the central

government to be

declared and not

specified in the bill.

5. Borrowing from Reserve Bank.-(1) The Central

Government shall not borrow from the Reserve

Bank.

(2) Notwithstanding anything contained in subsection (1), the Central Government may borrow

from the Reserve Bank by way of advances to meet

temporary excess of cash disbursement over cash

receipts during any financial year in accordance with

the agreements, which may be entered into by that

Government with the Reserve Bank:

Provided that any advances made by the Reserve

Bank to meet temporary excess cash disbursement

3) The Reserve Bank


17/40

may subscribe, on or

after the period

specified in this subsection, to the primary

issues of the central

Government securities

due to grounds of

National security or

National calamity.

This amendment

allows the central

Government to

monetise its budget

deficit on grounds of

national security or

calamity even after the

prescribed limit of two

years, which is in the

bill. Therefore, this

clause is killing the

initial objective of the The Indian Economy


over cash receipts in any financial year shall be

repayable in accordance with the provisions

contained in sub-section (5) of section 17 of the

Reserve Bank of India Act, 1934 (2 of 1934).

(3) Notwithstanding anything contained in sub-section


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(1), the Reserve Bank may subscribe to the primary issues

of the Central Government securities during the financial

year beginning on the 1st day of April 2001 and

subsequent two financial years.

(4) Notwithstanding anything contained in subsection (1), the Reserve Bank may buy and sell the

Central Government securities in the secondary

market.

bill of putting a cap on

government

borrowings. This

clause removes any

kind of ceiling on

government

borrowing that the bill

may have intended to

have.

6. Measures for fiscal transparency.-(1) The Central

Government shall take suitable measures to ensure

greater transparency in its fiscal operations in public

interest and minimise as far as practicable, secrecy in

the preparation of the annual budget.

(2) In particular, and without prejudice to the generality

of the foregoing provision, the Central Government shall,

at the time of presentation of the annual budget, disclose

in a statement as may be prescribed,

(a) The significant changes in the accounting standards,


19/40

policies and practices affecting or likely to affect the

computation of prescribed fiscal indicators;

(b) As far as practicable, and consistent with protection of

public interest, the contingent liabilities created by way of

guarantees including guarantees to finance exchange risk

on any transactions, all claims and commitments made by

the Central Government having potential budgetary

implications, including revenue demands raised but not

realised and liability in respect of major works and

contracts.

2) The Central

Government shall at the

time of any such

presentation of annual

financial statements or

demand for grants,

make such disclosures

and in such form as may

be prescribed.

Again, it is left to the

central Government at

the time of its

presentation whether

it chooses to stick to

the principles of fiscal

transparency.


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7. Measures to enforce compliance-(1) The Minister

in charge of the Ministry of Finance, shall review,

every quarter, the trends in receipts and expenditure

in relation to the budget and place before both

Houses of Parliament the outcome of such reviews.

(2) Whenever there is either shortfall in revenue or excess

of expenditure over pre-specified levels during any period

in a financial year, the Central Government shall

proportionately curtail the sums authorised to be paid and

applied from and out of the Consolidated Fund of India

under any Act to provide for the appropriation of such

sums:

Provided that nothing in this sub-section shall apply to

the expenditure charged on the Consolidated Fund of

India under clause (3) of article 112 of the Constitution.

2) whenever there is a

shortfall in revenue or

excess in expenditure

over pre-specified levels

mentioned in Fiscal

Policy Strategy

Statement and the rules

made under this act

during any period in the

financial year, the

central government


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shall take appropriate

measures for increasing

revenue or for reducing

expenditure.

This amendment

enables the

government to wipe

out the fiscal or

revenue deficit by

simply increasing the

taxes and not

necessarily curtailing

expenditure as was

initially desired while

drafting the bill.

The definitions of

what kind of

expenditure can be

postponed or curtailed The Indian Economy


(3) The Minister in charge of the Ministry of Finance,

shall make a statement in both Houses of Parliament

explaining

(a) any deviation in meeting the obligations cast on

the Central Government under this Act;

(b) whether such deviation is substantial and relates


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to the actual or the potential budgetary outcomes;

and

(c) The remedial measures the Central Government

proposes to take.

Provided that nothing

of this expenditure is

charged on the CFI

under clause 3 of article

112 of the Constitution

or to any other

expenditure which

cannot be postponed or

curtailed.

is not specified, thus

again leaving it to the

whim of the

government.

The above table gives a very clear picture as to how the Lok Sabha has diluted the bill under the pretext

of making the rules less stringent for future government, and not curtailing its development expenditure.

The various reasons given are that this is binding on all future governments, and post 2001 is not the best

time to tie the hands of the government, and all other unforeseen circumstances, which may make it

difficult to stick to such legislation. The above bill may work if the government in question is fiscally

conscientious and intends to stick to the desired objectives instead of focusing on how to bypass its

clauses. Thus, the whole point of a legislation, which will tie the hands of the government as far as nonproductive

expenditure is concerned is killed. Narrowing the definition of fiscal deficit, excluding all the

fiscal and revenue deficit targets, allowing the government to borrow endlessly from the RBI, allowing

the government to increase taxes to wipe out revenue deficit and throwing out all the clauses under


23/40

grounds of national security and calamity is hardly going to achieve the desired results of the legislation

unless the government is conscientious. Then again, if the government had been conscientious then there

would be no need for such legislation at all! All we can do is wait and watch how the government intends

to wipe out its revenue and fiscal deficit and reaching the desired targets. However, there could have

been a little more effort in drafting the bill and learning from the mistakes or success stories of other

countries. The following are some of the legislations already in place in other countries.

Fiscal targets used in OECD countries

5

Country Target

Austria

The goal is, within the legislative period, to reduce the general government deficit to below

3 per cent of GDP. This target is to be met mainly through expenditure cuts, although

changes in taxation will also play a role. The size of the expenditure cuts depends on the

state of the economic cycle at the time.

Canada

In 1993, the Canadian Government introduced a deficit target of approximately 3 per cent of

GDP by 1996-97 and introduced a new expenditure management system aimed at

expenditure restraint.

Denmark

The reduction of the deficit is an explicit objective. The target for expenditure growth is a

rate significantly lower than long-term growth in GDP. The Danish Government is now

proposing a target of surplus on average over the cycle.

Finland The Finnish Government adopted a new scheme of budget ceilings in 1990 in which the

5

Source: OECD, Budgeting for Results: Perspectives on Public Expenditure Management, 1995 and


24/40

various OECD economic surveys. The Indian Economy


Finnish Cabinet decides on expenditure ceilings for each ministry as formal guidance for

budget preparation.

France

France has been guided by the need to steadily lower central government deficits and to

reduce tax burdens. The five-year fiscal consolidation projections have recently been

altered. These projections increase the targeted central government budget deficit by 0.5

percentage points each year to 1999 relative to the projections in the Five Year Fiscal

Consolidation Act. New projections indicate a central government deficit of 3 per cent of

GDP in 1997. The new projections do not seem to have any claim to legal status. It is unclear

whether the Consolidation Act will be repealed to take account of the revised projections.

Germany

The target has been to reduce total public budget deficits from 5.5 per cent of GDP in 1991

to 3 percent in 1995. The Grundgesetz (GG) Basic Law of Germany requires that the budget

be balanced with respect to current revenue and current expenditure on average over the

economic cycle and limits revenue obtained by borrowing to the amount of investment

expenditure.

Greece

The 1991 stabilisation program aimed to decrease the central government s borrowing

requirement from 13 per cent of GDP to 4 per cent in 1994.

Italy

The target in the mid-1980s was to reduce the total borrowing requirement of the extended

public sector to about 7-8 per cent of GDP by 1990. These targets were not met.

Japan

The Government has not adopted aggregate spending targets since the early 1980s.


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However, it has pursued fiscal reforms aimed at phasing out deficit financing bonds and

reducing the ratio of public debt to GNP. The main instrument of fiscal restraint has been

strict guidelines, which every ministry has to follow in preparing budget requests.

Netherlands

The coalition agreement for 1991-94 set the target for the budget deficit at 4 per cent of net

national income for 1991 declining to 3 per cent in 1994.

New Zealand

The Fiscal Responsibility Act does not set specific targets, rather it requires governments to

set targets and follow broad principles of economic management. The New Zealand

Government s long-term objectives include: reducing net public debt to below 20 per cent of

GDP; achieving at least fiscal balance over the economic cycle once net public debt is below

20 per cent of GDP; maintaining a broad-base and low-rate tax environment; reducing

current outlays to below 30 per cent of GDP; restoring net worth to significantly positive

levels and reducing risks to the fiscal position.

Spain

The medium term objective has been to control the public sector deficit and curtail public

expenditure. With the move to a single European market, budgeting in the early 1990s

emphasised continued fiscal consolidation and a shift from consumption to investment

expenditure.

Turkey

The Five-Year Development Plan specifies targets for economic performance and public

finance. The Plan also contains target ratios of public expenditure to GNP.

United

Kingdom

Since 1980, the Medium Term Fiscal Strategy has provided the framework for monetary and

fiscal policy. In 1992, the New Control Total (which involves the United Kingdom Cabinet


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establishing a total amount for public spending and then making recommendations on

allocations within the total to departments and programs) was to be constrained to a rate

that ensured that general government expenditure grew more slowly than the economy as a

whole over time. The current medium term goal is to bring the public sector borrowing

requirement back towards balance over the medium term and to ensure that when the

economy s growth rate is on trend the public sector borrows no more than required to

finance its net capital spending. The Indian Economy


United States

Congress passed legislation in 1995 (the Balanced Budget Resolution) that required the

United States Government to balance the budget by 2002. However, the legislation contains

no details of specific spending reductions or receipt increases that would lead to balance.

Fiscal Responsibility in New Zealand

6

The New Zealand Fiscal Responsibility Act 1994 is the most notable example of legislation designed

to impose fiscal discipline largely through legislated fiscal reporting requirements that increase the

transparency of fiscal policy processes. It sets a general range of objectives based on the principles

of prudence and stability. France and the United States and now India have been exponents of the

other approach of legislation more specific and measurable fiscal objectives.

In keeping with the trade-off between flexibility and the binding nature of constraints, the former

approach would enable a more flexible fiscal policy response to changes in economic conditions

while the latter approach, in theory, may provide more certainty that fiscal policy will follow a

particular course. However, overseas experience to date with targets, especially in the United States

at the federal level, suggests that they have not matched the expectations that existed when they

were introduced.

New Zealand's legislation principles of responsible f iscal management


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Reduction of Crown debt to prudent levels, to provide a buffer against factors that may

affect the level of total Crown debt in the future, by ensuring that, until such levels have

been achieved, the total operating expenses of the Crown in each financial year are less

than the total operating revenues.

Once prudent debt levels are reached, they are to be maintained through ensuring that, on

average, over a reasonable period of time, the total operating expenses of the Crown do not

exceed its total operating revenues.

Achieving and maintaining levels of Crown net worth that provide a buffer against factors

that may affect adversely on the Crowns net worth in future.

Prudent management of fiscal risks facing the Crown.

Pursuing policies consistent with predictability about the level and stability of tax rates for

future years.

The New Zealand Fiscal Responsibility Act allows New Zealand Governments to depart

from these principles only if such a departure is temporary. In the event of a departure, the

Act requires the government of the day to specify the reason for the departure, how it intends to

return to the principles, and the period of time it expects to take to return to the principles.

Treasury's submissions to the JCPA inquiry into fiscal responsibility legislation and the Commission

outlined the main features of the New Zealand legislation, including its reporting requirements. Both

submissions noted that because 'the legislation has only been in place since late June 1994 it is too

early to adequately judge its success'. However, they also noted that, following the first presentation

of a Budget Policy Statement to the Finance and Expenditure Committee, as provided for under the

Act, the Committee's report suggests it found the process to be beneficial. In addition, while there

may need to be a change in government and some strain on New Zealand's fiscal situation before

the Act is fully tested, the performance of the legislation to date has been encouraging.

The release of the first Budget Policy Statement early last year encouraged public debate about the

fiscal policy framework and the trade-offs between debt reduction, tax levels and government


28/40

expenditure.

Other benefits from the Act to date, observed by New Zealand politicians, officials, business people

and commentators, include:

enhanced credibility of the fiscal policy process

improved focus on decision-making

6

Clauses obtained from the New Zealand Legislation-Fiscal Responsibility Act 1994. The Indian Economy


a focus by politicians on balance sheet concepts and a related attention to the efficiency of

asset use

A concentration of the minds of New Zealand Ministers on avoiding cost over-runs in their

portfolios arising from the Act's regular reporting requirements.

identification of formerly hidden contingent liabilities

an acceptance of the principles of risk management in government

increased pressure on the New Zealand Treasury to improve its forecasting performance

arising from the Act's transparency and accountability requirements

Better appreciation outside the New Zealand Treasury of the processes followed to make

economic forecasts.

In addition, the New Zealand Treasury considers that the resource costs of the Fiscal Responsibility

Act are not too onerous, as most of the work needs to be done anyway. There are, however, more

budget production processes and these slow the budget down by a few weeks.

Various legislations in United States of America

7

Gramm-Rudman-Hollings 1985 and 1987

In 1985, Congress enacted the Balanced Budget and Emergency Deficit Control Act. This Act is


29/40

known as Gramm-Rudman-Hollingnamed after the Senate authors of the original bill (Senators Phil

Gramm of Texas, Warren Rudman of New Hampshire, and Ernest F. Hollings of South Carolina).

Gramm-Rudman-Hollings established "maximum deficit amounts". If the deficit exceeded these

statutory limits, the President was required to issue a sequester order that would

reduce all non-exempt spending by a uniform percentage. Such sequestration was

attempted for the first time by any government and in fact, a few offices were closed down for a

few days due to overshooting their expenditure. Gramm-Rudman-Hollings also made a number of

changes to the congressional budget process to enforce maximum deficit amounts and to

strengthen congressional budget enforcement procedures. Due to the Office's role in implementing

sequestration

8

orders, the Court found it unacceptable from a constitutional perspective for

Congress to vest in a congressional entity a duty of the executive branch -- the responsibility for

executing a law. In 1987, Congress enacted the Balanced Budget and Emergency Deficit

Control Reaffirmation Act which corrected the constitutional flaw in Gramm-Rudman-Hollings by

assigning all the sequester responsibilities to the Office of Management and Budget (OMB). OMB is

part of the executive branch. The 1987 Act also extended the system of deficit limits through fiscal

year 1992. Neither act was very successful in lowering out the budgetary deficits.

The Budget Enforcement Act of 1990

Despite Gramm-Rudman-Hollings procedures, the deficit continued to increase. In the spring of

1990, it became clear that the deficit was going to exceed the Gramm-Rudman's maximum deficit

limit by nearly $100 billion. To respond to growing deficits, President signed into law the Omnibus

Budget Reconciliation Act of 1990, which represented the budget agreement negotiated between

the Bush Administration and Congress. The 1990 Budget Enforcement Act (BEA) effectively replaced

the Gramm-Rudman-Hollings system of deficit limits with two independent enforcement regimens:

caps on discretionary spending and a pay-as-you-go requirement for direct spending


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and revenue legislation. The BEA also provided for enforcement by both the congressional and

executive branch of the discretionary caps and the pay-as-you-go requirement. The spending

7

Source: U. S. Senate, http://www.senate.gov/~budget/republican/reference/cliff_notes/cliffc2.htm.

8

Sequestrations: Series of automatic spending cuts that would come into play if the federal budget did

not fall within $10 billion of target deficit reductions. The Indian Economy


disciplines of the BEA were extended in the 1993 Reconciliation legislation through the end of fiscal

year 1998.

Pay as you go and sequestration under the BEA requires the OMB to also enforce a "pay-as-you-go"

requirement which has a similar effect as the Senate's point of order: Congress is required to

"pay for" any changes to programs which result in an increase in direct spending, or in

this case risk a sequester. If OMB estimates that the sum of all direct spending and revenue

legislation enacted since 1990 will result in a net increase in the deficit for the fiscal year, then the

President is required to issue a sequester order reducing all non-exempt direct spending accounts by

a uniform percentage in order to eliminate the net deficit increase. Most direct spending is either

exempt from a sequester order or operates under special rules that minimize the reduction that can

be made in direct spending. Social Security is exempt from a pay-as-you-go sequester and Medicare

cannot be reduced by more than 4 percent

Chronology of events

9

A. The Gramm-Rudman-Hollings Act

1. Under the Gramm-Rudman-Hollings Act, the federal budget deficit was to be reduced by at least

$36 billion each fiscal year so that the budget would be balanced by fiscal 1991.


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2. Prior to the beginning of each fiscal year, estimates of whether and by how much the budget

would exceed the deficit target were to be made.

a. If the budget exceeded the deficit target, Congress and the president were to agree on spending

cuts or across-the-board spending cuts were to be instituted.

3. There were several objections to the Gramm-Rudman-Hollings Act.

a. The Act eliminated fiscal policy as a means of stabilizing the economy.

1. This criticism was less serious than it sounds because more reliance could be placed on monetary

policy and because the Act could be suspended during recessions or wartime.

b. There was a lack of flexibility regarding both the annual reduction in the deficit and how it could

be achieved.

B. President Bush's Deficit Reduction Plan

1. President Bush presented a plan to reduce projected deficits by almost $500 billion over a fiveyear span starting

with fiscal 1991.

2. Most of the deficit reduction was to come from cuts in government spending.

3. The plan eliminated the annual Gramm-Rudman deficit targets and mandated a pay-as-you-go

approach for increasing spending or decreasing taxes.

C. President Clinton's Deficit Reduction Plan

1. President Clinton presented a plan to reduce the estimated budget deficits by $496 billion over a

five-year span starting in fiscal 1994.

2. The reduction was to come through both spending cuts and tax hikes.

D. The Balanced Budget Amendment

1. Proponents of a constitutional amendment requiring the federal government to balance the

budget annually are concerned with both the adverse effects of structural deficits and limiting the

size of the government sector.

2. Most economists do not support a constitutional amendment requiring a balanced budget.

a. They believe such an amendment can cause greater instability in the economy.


32/40

9

Statement on the United States District Court Decision on the Constitutionality of the Balanced Budget

and Emergency Deficit Control Act of 1986 The Indian Economy


b. They believe that it is best to leave decisions regarding budget priorities and the balance between

the government and private sectors to elected representatives.

c. They believe that such an amendment may not effectively limit the growth of the federal

government.

3. There are practical problems associated with balancing the budget.

a. Revenues and expenditures must be predicted for the budget year in question.

1. Such forecasts are often in accurate because of changing business conditions.

4. A balanced budget amendment may some unintended consequences.

a. A balanced budget amendment may result in more off-budget spending.

b. A balanced budget amendment may force the private sector to bear the cost of new social

programs.

The Budget Enforcement Act was enacted in 1990 in an effort to control future budgetary actions. It

did this through two mechanisms: limits on discretionary spending, and the pay-as-you-go process

to require that any legislative action on direct spending or revenues, which would increase the

deficit, be offset.

Budget Enforcement Act Procedures

The BEA established a pair of mechanisms that were intended to make it difficult for Congress or the

President to undo the budget agreement. First, it established a limit on the level of

discretionary spending (divided into defense, international, and domestic discretionary spending

for FY1991-93), to be enforced by a presidential sequester order affecting only discretionary

spending (only the specific sub-category for FY1991-93). Second, the act established the payas-you-go procedure,

which requires that increases in direct spending or reductions in

revenues due to legislative action be offset by other such legislative actions so that


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there is no net increase in the deficit. This process is also enforced by a presidential sequester

order, one that would affect only non-exempt direct spending programs. The result was that these

new mechanisms shifted the focus away from actions Congress and the President exercised no

direct control over (the effect of the economy on the deficit) to those they could control (spending

and revenue legislation).

Implications for a Balanced Budget

The budget submitted by President Clinton on February 2, 1998, projected a surplus for FY1999 of

$9.5 billion for the consolidated budget). Although this might be regarded as, the achievement of

the intended purpose of the BEA, the control mechanisms established by the act would continue to

be in force. The control mechanisms established under the Budget Enforcement Act are not based

on achieving a specific level of deficit or surplus. The provisions of the pay-as-you-go process focus

on the net impact on the budget deficit, rather than on achieving a specific deficit. In other words,

as long as the pay-as-you-go process continues to exist in its current form, any legislation, which

would increase mandatory spending or decrease revenues, would still have to be fully offset,

regardless of whether the projected effect would be a budget deficit or surplus. Similarly, the focus

of the discretionary spending caps on a specific level of spending means that the resulting level of a

surplus or deficit has no impact on their effect.

Fiscal targets for Member States of the European Union

The Growth and Stability Pact 1999 emphasised that further consolidation is required in most

Member States in order to reduce high ratios of general government debt relative to GDP and bring

them down to 60% within an appropriate period. The need for stronger fiscal positions contrasts

with substantial actual deficits in many countries. A forceful debt reduction within an appropriate

period of time is warranted, to make it easier to cope with future budgetary challenges, such as the The Indian

Economy


increasing fiscal burden arising from the ageing of the population, in particular in the context of

unfunded public pension systems, as well as the medium-term challenges arising from the need to


34/40

reform unprofitable public enterprises and reduce structural unemployment. In addition, reducing

budgetary imbalances is necessary to re-establish a degree of flexibility for fiscal policies, which

enables countries to respond to adverse cyclical developments, i.e. low fiscal deficits, or surpluses

are needed under normal circumstances to allow automatic stabilisers to work during periods of

weak economic activity.

10

Reference rates were fixed for fiscal deficits and debt ratios of the

member states, 3% being the reference rate for the former and 60% for the latter.

The criterion on the government budgetary position

With regard to the performance of individual Member States in 1997,

three countries have recorded fiscal surpluses (Denmark, Ireland and Luxembourg)

Eleven Member States have achieved or maintained deficits at or below the 3% reference value

specified in the Treaty (Belgium, Germany, Spain, France, Italy, the Netherlands, Austria,

Portugal, Finland, Sweden and the United Kingdom).

Greece recorded a deficit of 4.0%, which is still above the reference value.

For 1998, fiscal surpluses or further reductions in deficit ratios are projected by the Commission

for nearly all Member States. The Greek deficit is expected to fall to 2.2% of.

As regards government debt, in the three Member States with debt-to-GDP ratios of above

100%, debt has continued to decline in relation to GDP.

In Belgium the debt ratio in 1997 was 122.2%, i.e. 13.0 percentage points lower than the peak

in 1993;

in Greece the debt ratio in 1997 stood at 108.7%, i.e. 2.9 7 percentage points below the latest

peak in 1996; and

In Italy, the debt ratio was 121.6%, i.e. 3.3 percentage points below the peak of 1994.

In the seven countries, which in 1996 had debt ratios significantly above 60%, but below 80%

of GDP, debt ratios also declined.


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This was particularly the case in Denmark, Ireland and the Netherlands, where debt ratios in

1997 were 16.5, 30.0 and 9.1 percentage points respectively below their peak levels of 1993,

and stood at 65.1%, 66.3% and 72.1% of GDP respectively;

In Spain the debt ratio in 1997 declined by 1.3 percentage points from its peak level of 1996 to

reach 68.8% of GDP;

In Austria, the corresponding reduction amounted to 3.4 percentage points, taking the debt ratio

to 66.1% of GDP.

In Portugal, the debt ratio was 3.9 percentage points below its 1995 level, bringing the debt

ratio to 62.0% of GDP.

In Sweden, the debt ratio was 2.4 percentage points below its peak level of 1994, reaching

76.6% of GDP in 1997.

In Germany, which in 1996 had a debt ratio of just above the 60% reference value, the debt

ratio continued its upward trend and in 1997 was 19.8 percentage points higher than in 1991,

standing at 61.3% of GDP.

In 1997, four countries continued to have debt ratios of below the 60% reference value (France,

Luxembourg, Finland and the United Kingdom).

In France, the debt ratio continued its upward trend to reach 58.0% of GDP in 1997 (see Table

A and Chart B).

For 1998, further reductions in debt-to-GDP ratios are projected by the omission for all Member

States, which had debt ratios of above 60% in 1997.

In the cases of Denmark, Ireland and Portugal, a reduction to a level at or below the reference

value is forecast.

10

European Union Fiscal Targets. The Indian Economy



36/40

As regards countries with debt ratios of 50-60% of GDP in 1997, Finland and the United Kingdom

are anticipated to reduce their debt ratios further below 60%, whereas in France the debt ratio is

expected to increase marginally.

Overall, progress in reducing fiscal deficit and debt ratios has generally accelerated. Thus stating

clearly reference values of debt ratios and fiscal and budgetary deficits to strengthen a joint

currency worked very well. Therefore, the European Union has been able to bring in fiscal discipline

through its monetary policies and clear targets. Though many believe that such a drastic reduction

in deficits to comply with the reference values have a lot to do with creative accounting on the

part of the Member States.

Above we can see that fiscal restrain either has been brought by broadly prescribing objectives as in the

case of the New Zealand legislation, or have fiscal and revenue deficit targets as in the case of United

States of America and European Union. The European Union has also experimented the concept of

bringing in fiscal discipline through a common currency and succeeded to quite an extent. Another

method that New Zealand used was to make its central bank independent after giving various

prescriptions and targets compatible with the governments fiscal policy.

Autonomy of Central Bank

11

One of the important aspects of bringing in such legislation is to give the Central Bank more autonomy.

Central bank independence generally relates to three areas viz. personnel matters: financial aspects; and

conduct of policy. Personnel independence refers to the extent to which the Government distances itself

from appointment, term of office and dismissal procedures of top central bank officials and the governing

board. It also includes the extent and nature of representation of the Government in the governing body

of the central bank. Financial independence relates to the freedom of the central bank to decide the extent

to which Government expenditure is either directly or indirectly financed via central bank credit. Direct

or automatic access of Government to central bank credit would naturally imply that monetary policy is

subordinate to fiscal policy. Finally, policy independence is related to the flexibility given to the central


37/40

bank in the formulation and execution of monetary policy. In connection with this, recent literature has

stressed the difference between goal independence and instrument independence. Goal independence refers

to a situation where the central bank itself can choose the policy priorities of stabilising output or prices at

any given point of time, thus setting the goal of monetary policy. Instrument independence implies that

the central bank is only free to choose the means to achieve the objective set by the Government. First, the

most prominent argument for central bank independence is based on the time inconsistency problem.

Time inconsistency arises when the best plan currently made for some future period is no longer optimal

when that period actually starts. In the context of monetary policy, the time inconsistency problem arises

because there are incentives for a politically motivated policymaker to try to exploit the short-run tradeoff between

employment and inflation. The conservative central banker approach postulates the

appointment of a conservative central banker whose aversion to inflation is well known which would

result in low inflation because of the economic agents belief in the reputation of the central banker. The

optimal contract approach postulates the existence of an optimal contract between the central banker

and the Government. The central banker s tenure in office is conditional upon his performance of

achieving low inflation, failure of which would lead to the repudiation of the contract of tenure.

Historically, there are successful examples of both types of models of central bank independence while

11

Reddy, Y.V. 2001. Autonomy of the central bank - changing contours in India. New Delhi: Reserve

Bank of India. The Indian Economy


US is often seen as an example of conservative Central Bank, New Zealand is characterised as a follower

of optimal contract approach. (Reddy Y V. 2001.)

Indian Scenario

During the post-reform period, the relationship between the central bank and the Government took a

new turn through a welcome development in the supplemental agreement between the

Government and the RBI in September 1994 on the abolition of the ad hoc treasury bills to be made


38/40

effective from April 1997. The measure eliminated the automatic monetisation of Government deficits

and resulted in considerable moderation of the monetised deficit in the latter half of the Nineties. At the

same time, with gradual opening up of the economy and development of domestic financial markets, the

operational framework of the RBI also changed considerably with clearer articulation of policy goals and

more and more public dissemination of vast amount of data relating to its operations. Partly because of

such institutional changes in recent years, inflation in India has been moderate relative to other

developing countries despite high fiscal deficit, and most inflationary episodes have been caused by

exogenous supply-side factors. As far as public finances are concerned, the Government generally relied

on domestic sources to finance the deficit. It has been pointed out by some experts that the RBI, though

not formally independent, has enjoyed a high degree of operational autonomy during the post-reform

period. In fact, during the recent period, the RBI enjoys considerable instrument independence for

attaining monetary policy objectives. Significant achievements in financial reforms including

strengthening of the banking supervision capabilities of the RBI have enhanced its credibility and

instrument independence.

Current status

In terms of redefining the functions of the RBI, enabling a movement towards meaningful autonomy,

Governor Jalan s statement on Monetary and Credit Policy on April 19, 2001 is a landmark event. First, it

was decided to divest RBI of all the ownership functions in commercial banking, development finance

and securities trading entities. Secondly, a beginning was made in recommending divestiture of RBI s

supervisory functions about cooperative banks, which would presumably be extended to non-banking

financial companies and later to all commercial banks. Thirdly, the RBI signaled initiation of steps for

separation of Government debt management function from monetary policy. These measures would

enable the RBI to primarily focus on its role as monetary authority and enhance the possibility of a move

towards greater autonomy.

Recommendations

Thus, we can see that the approach of the government needs to be decided as to whether it wants an


39/40

establishing report standard approach or a fiscal targets setting approach. Even at the end of it, the

initiative lies in the conscience of the government and whether it wants to be fiscally disciplined. These

are however recommendations that the Central Government could follow to make this legislation more

successful.

1. To make the entire act or some clauses of the act binding on the Central Government such as clause

five where Central Government cannot borrow from the RBI.

2. To have Expenditure Reduction Act along with the Fiscal Responsibility and Budget Management

Act.

3. To take suggestions from the Expenditure Reforms Commission to cut non-productive expenditure

on government departments.

4. To stop State Government guarantees.

5. RBI to make prescriptions to each state on its finances, and follow up strongly.

6. To stop monetising budget deficits in the near future. The Indian Economy


7. To change to accrual basis of accounting for all government departments.

8. To rely on other indicators such as interest rates, savings rates, currency rates etc.

9. To sequester government departments expenditure after specifying a ceiling on the non-productive

departmental expenditure for each government department.

10. To give the RBI more autonomy in terms of independence from political, executive and legislative

power.

References

Fiscal Responsibility and Budget Management Bill 2000.

Gramm-Rudman-Hollings Act. Accessed on 28 May 2003. Available from

www.hollings.senate.gov/issues_budget.html

Kannan, R., and Lahiri, Ashok. 2002. Indias fiscal deficits and their Sustainability in perspective. New

Delhi: National Institute of Public Finance and Policy.


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Notice of Amendments.

OECD, Budgeting for Results: Perspectives on Public Expenditure Management, 1995 and various

OECD economic surveys. Fiscal targets used in OECD countries.

Recent overseas and Australian experience with fiscal responsibility legislation, fiscal reporting and fiscal

targets. Accessed on 27 May 2003. Available from www.imf.org/external/np/rosc/ind/fiscal.htm

Reddy, Y.V. 2001. Autonomy of the central bank - changing contours in India. New Delhi: Reserve Bank of

India.

Statement on the United States District Court Decision on the Constitutionality of the Balanced

Budget and Emergency Deficit Control Act of 1986.3

Documents

FISCAL RESPONSIBILITY AND BUDGET MANGEMENT