Economic Survey Advocates FRBM Flexibility for Centre While Warning of States' Fiscal Health
The Economic Survey 2025-26 suggests a delay in strict fiscal targets for the Centre under the FRBM Act, citing the need for policy flexibility in a volatile geopolitical environment. While the Centre's fiscal deficit is on target to reach 4.4% by the end of the current financial year, the Survey warns that States' finances are worsening. The number of States with a revenue surplus decreased from 19 in 2018-19 to 11 in 2024-25. The Survey emphasizes that while the 3% fiscal deficit target remains important for market trust, a rigid adherence might not be the best approach in the current uncertain global climate.
Key Points
- Survey suggests delaying strict FRBM fiscal targets for the Centre due to global uncertainty.
- Centre's fiscal deficit peaked at 9.2% in 2020-21 and is targeted at 4.4% for the current year.
- States' collective revenue deficit increased from 0.1% to 0.7% of GDP over five years.
- Only 11 states remained in revenue surplus in 2024-25, down from 19 in 2018-19.
- The 3% fiscal deficit target has been achieved only once since the FRBM Act was enacted in 2003.
Exam Facts
- FRBM Act enacted: 2003.
- Centre's fiscal deficit target: 4.4%.
- Peak deficit (2020-21): 9.2%.
- Number of surplus states: 11 (2024-25).
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