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Source: Getty

In The Media
Carnegie India

Budget 2019: India Has a Law to Cap Fiscal Deficit but UPA and NDA Couldn’t Care Less

The Indian budget is such a big deal because it combines the exercise of many powers. Among them, the power to run deficits is special.

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By Suyash Rai
Published on Jul 4, 2019
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Political Economy

This program studies contemporary developments in India’s political economy, with a view towards understanding and informing India’s developmental choices. Scholars in the program analyze economic and regulatory policies, design and working of public institutions, interfaces between politics and the economy, and performance of key sectors of the economy such as finance and land.

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Source: Print

The budget is such a big deal because it combines the exercise of many powers. Among them, the power to run deficits is special. In a competitive democracy, the pressures to spend always exceed the willingness to tax. This creates a fertile ground for excessive deficits, whose consequences are suffered by future generations.

The legal framework for fiscal discipline is provided under the Fiscal Responsibility and Budget Management (FRBM) Act. Passed in 2003 when the NDA was in power, and notified in 2004 by the UPA government, the FRBM law sets deficit caps (fiscal deficit of 3 per cent of the GDP and elimination of revenue deficit) and limits on debt and guarantees, among other requirements.

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This article was originally published by the Print.

About the Author

Suyash Rai

Former Fellow, Carnegie India

Suyash Rai was a fellow at Carnegie India. His research focuses on the political economy of economic reforms, and the performance of public institutions in India.

    Recent Work

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Suyash Rai
Former Fellow, Carnegie India
Suyash Rai
Domestic PoliticsEconomyIndia

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

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