FRBMA and Fiscal Health of Sub-National Governments in India

This paper indicates fiscal performance of sub-national governments, after the enactment of Fiscal Responsibility and Budget Management Act (FRBMA). Fiscal deficit and revenue deficit reached higher at both tier of government. The central government has introduced a number of measures to redesign fiscal management to encourage improvement in state fiscal performance based on the recommendations of successive finance commissions. The aim of central government is to reduce the pressure of debt and correct fiscal and revenue deficit at both tier of government within targeted period assigned by FRBM Act. The fiscal position of Indian states worsened, before FRBM Act, fiscal deficit and revenue deficit continuously rose. But after the implementation of FRBM Act, government initiated a number of policy measures to correct fiscal condition at sub-national level. States show positive sign towards fiscal health and improve their fiscal and revenue deficit. The adopted policy is effective to improve the fiscal scene of sub-national governments in India.