With reference to the "FRBM Review Committee", consider the following statements: 1. It was set up to maintain the status quo of the 2003 Act without any changes. 2. It recommended a shift towards a debt-to-GDP ratio as the primary anchor. 3. It was tasked with keeping an eye on the future path of growth. Which of the statements given above is/are correct?

The correct option is 2 and 3 only. Explanation The FRBM Review Committee, chaired by N.K. Singh, was constituted by the Government of India in 2016 to review the implementation of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. Its objective was to suggest a future fiscal framework aligned with India's evolving economic requirements. Statement-wise Analysis: - Statement 1 is Incorrect. The committee was not established to maintain the status quo. Instead, it was mandated to comprehensively review the existing Act and suggest modifications. It eventually recommended repealing the 2003 Act and replacing it with a new "Debt and Fiscal Responsibility Act." - Statement 2 is Correct. A core recommendation of the committee was to shift the primary anchor of fiscal policy from the fiscal deficit to the Debt-to-GDP ratio. It proposed a target of 60% for the general government (40% for the Centre and 20% for the States) to be achieved by 2023. - Statement 3 is Correct. The Terms of Reference (ToR) tasked the committee with examining the feasibility of aligning fiscal expansion or contraction with credit contraction or expansion. This implies keeping an eye on the future path of growth and ensuring that fiscal consolidation does not stifle developmental requirements. Key Takeaway: The N.K. Singh Committee recommended adopting the Debt-to-GDP ratio as the medium-term anchor for fiscal policy, targeting a combined limit of 60%, while allowing for "Escape Clauses" to accommodate specific economic triggers.

NCERT Class 12 Economics — Chapter 7: Government Budget and the Economy

mcqmedium

With reference to the "FRBM Review Committee", consider the following statements:

It was set up to maintain the status quo of the 2003 Act without any changes.
It recommended a shift towards a debt-to-GDP ratio as the primary anchor.
It was tasked with keeping an eye on the future path of growth.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 and 3 only
B1, 2 and 3
C1 and 2 only
D2 only

Did you get this right?

Solution

The correct option is 2 and 3 only.

Explanation

The FRBM Review Committee, chaired by N.K. Singh, was constituted by the Government of India in 2016 to review the implementation of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. Its objective was to suggest a future fiscal framework aligned with India's evolving economic requirements.

Statement-wise Analysis:

Statement 1 is Incorrect. The committee was not established to maintain the status quo. Instead, it was mandated to comprehensively review the existing Act and suggest modifications. It eventually recommended repealing the 2003 Act and replacing it with a new "Debt and Fiscal Responsibility Act."
Statement 2 is Correct. A core recommendation of the committee was to shift the primary anchor of fiscal policy from the fiscal deficit to the Debt-to-GDP ratio. It proposed a target of 60% for the general government (40% for the Centre and 20% for the States) to be achieved by 2023.
Statement 3 is Correct. The Terms of Reference (ToR) tasked the committee with examining the feasibility of aligning fiscal expansion or contraction with credit contraction or expansion. This implies keeping an eye on the future path of growth and ensuring that fiscal consolidation does not stifle developmental requirements.

Key Takeaway:
The N.K. Singh Committee recommended adopting the Debt-to-GDP ratio as the medium-term anchor for fiscal policy, targeting a combined limit of 60%, while allowing for "Escape Clauses" to accommodate specific economic triggers.

Your note

More from Chapter 7: Government Budget and the Economy

Consider the following statements regarding the "Annual Financial Statement" in India: 1. It is a statutory requirement under the Fiscal Responsibility and Budget Management Act, not the Constitution. 2. It includes estimates for the coming financial year. 3. It distinguishes between the revenue account and the capital account. Which of the statements given above is/are correct?

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With reference to the "Allocation Function" of the government budget, consider the following statements: 1. It addresses the provision of public goods that cannot be provided effectively by the market mechanism. 2. Public goods are characterized by being rivalrous in consumption and excludable in nature. 3. The "free-rider" problem is easily solved by charging a user fee for public goods. Which of the statements given above is/are correct?

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Consider the following statements regarding "Public Provision" and "Public Production": 1. Public provision implies that goods are financed through the budget and used without direct payment. 2. Goods provided by the government must necessarily be produced directly by the government. 3. Public goods may be produced by the private sector. Which of the statements given above is/are correct?

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Consider the following statements regarding "Capital Receipts": 1. Recovery of loans is considered a revenue receipt. 2. Capital receipts either create a liability or reduce the financial assets of the government. 3. Market borrowings are considered non-debt creating capital receipts. Which of the statements given above is/are correct?

hard

Consider the following statements regarding "Revenue Expenditure": 1. It includes expenditure that does not result in the creation of assets. 2. Interest payments on debt are classified as capital expenditure. 3. Grants given to state governments are treated as revenue expenditure even if they are meant for the creation of assets. Which of the statements given above is/are correct?

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The correct option is 2 and 3 only.

Explanation

Statement-wise Analysis:

Statement 1 is Incorrect. The committee was not established to maintain the status quo. Instead, it was mandated to comprehensively review the existing Act and suggest modifications. It eventually recommended repealing the 2003 Act and replacing it with a new "Debt and Fiscal Responsibility Act."
Statement 2 is Correct. A core recommendation of the committee was to shift the primary anchor of fiscal policy from the fiscal deficit to the Debt-to-GDP ratio. It proposed a target of 60% for the general government (40% for the Centre and 20% for the States) to be achieved by 2023.
Statement 3 is Correct. The Terms of Reference (ToR) tasked the committee with examining the feasibility of aligning fiscal expansion or contraction with credit contraction or expansion. This implies keeping an eye on the future path of growth and ensuring that fiscal consolidation does not stifle developmental requirements.