Definition
The full form of FRBM in finance is the Fiscal Responsibility and Budget Management. It is a legislative measure enacted in countries like India to ensure fiscal discipline, limit the amount of deficit and debt, and guide the government towards a balanced budget. The main goal of FRBM is to maximize efficient management of the country’s finances.
Key Takeaways
- FRBM stands for Fiscal Responsibility and Budget Management, legislation in Indian Fiscal Legislation, which promotes systematic fiscal discipline and prudence, implemented in 2003.
- The main objective of FRBM is to eliminate revenue deficit, and reduce fiscal deficit, to improve macroeconomic management, thereby ensuring long-term fiscal stability.
- An important component of FRBM is the FRBM Rule, which prohibits the government from borrowing from the Reserve Bank of India, therefore ensuring reduced inflationary pressures.
Importance
The Full Form of FRBM, which stands for the Fiscal Responsibility and Budget Management, is highly significant in financial terminologies due to its role in maintaining the financial discipline of a country.
This Act, enacted in India, regulates the government’s expenditure and borrowing patterns, aiming to keep inflation in check and promoting long-term economic stability.
Under the directives of the FRBM Act, the government is required to limit its fiscal deficit and eliminate revenue deficit, thereby ensuring a balanced budget and overall fiscal prudence.
This subsequently reduces the demand for private borrowing, and promotes investment, all contributing towards healthier economic growth.
Therefore, the FRBM’s full form is significant as it represents financial responsibility and balanced fiscal management, key to any country’s economic well-being.
Explanation
The full form of FRBM stands for Fiscal Responsibility and Budget Management. The main purpose of the FRBM is to ensure fiscal discipline in the country, especially for governmental bodies. This is done by setting targets for the government to control deficits, increase revenue, and reduce public debts.
The implementation of the FRBM ensures that the country’s financial health is maintained and strengthened over time. It ideally helps in preventing situations where the government’s financial operations could have potentially harmful consequences for the economy. The FRBM is essentially an act of parliament which sets the responsibility of the government to ensure prudence in fiscal management and reduction of the country’s fiscal deficits.
This entails controlling expenditure, improving fiscal stability, and balancing the budget. By doing so, this act strives to improve the macroeconomic condition of the country, maintain stable inflation, and promote sustainable economic growth. In essence, FRBM Act forms a fiscal framework that directs both present and future fiscal policies of a country.
Examples of Full Form of FRBM
The full form of FRBM is Fiscal Responsibility and Budget Management. This term is generally used in the context of the government and how it manages its finances. I’ll provide you with three examples:
Indian Government’s FRBM Act 2003: The Indian Government enacted the FRBM Act in 2003 to control its fiscal deficit and build a sustainable path for fiscal consolidation. The Act was designed to limit government borrowing and prevent fiscal mismanagement, helping ensure a sustainable level of public debt.
Application in the United States: The U.S. doesn’t have a specific FRBM law, but similar principles are applied, particularly in the form of the Budget Control Act of
This Act was designed to cut spending and cap future spending to reduce the fiscal deficit.
European Union’s Stability and Growth Pact: This is akin to an FRBM Act for EU member countries. It was established to maintain fiscal discipline among the EU Member states, with rules for fiscal responsibility and penalties for non-compliance. This pact helps keep the fiscal deficits and public debt of the member countries in check.
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FAQs on Full Form of FRBM
What is the full form of FRBM?
The full form of FRBM is Fiscal Responsibility and Budget Management.
What is the purpose of FRBM?
The FRBM Act was enacted to introduce transparency in India’s fiscal management systems. The main purpose of this act is to ensure inter-generational equity in fiscal management, long-run macroeconomic stability, better coordination between fiscal and monetary policy, and faster fiscal consolidation.
When was FRBM implemented?
The FRBM Act was enacted in 2003 and the FRBM Rules came into force from July 5, 2004.
Is FRBM Act effective for economic stability?
Yes, the FRBM Act has been effective in bringing down fiscal deficits and increasing transparency in fiscal operations of the government.
How does FRBM Act affect common people?
The main way the Act affects common people is through the impact on the economy. By controlling government spending and ensuring fiscal stability, the Act creates a conducive environment for growth and development. This, in turn, impacts people’s income and lifestyle.
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Related Entrepreneurship Terms
- Fiscal Responsibility and Budget Management Act: This is the full form of FRBM, which was enacted by the Government of India to ensure financial discipline and reduce the fiscal deficit.
- Revenue Deficit: This is the fiscal situation where net income is less than the projected net spending. The FRBM act aims to eliminate such deficit.
- Fiscal Deficit: This refers to the difference between the government’s total income and its total expenditure. The FRBM tries to cap this within acceptable limits.
- Economic Policy: FRBM plays a significant role in shaping the country’s economic policy, specifically in maintaining fiscal stability.
- Debt Management: This is one of the key objectives of the FRBM Act, aiming to reduce the total public debt to a sustainable level.
Sources for More Information
- Investopedia: An online resource providing finance related terms, including the full-form of FRBM, its meaning and full explanation.
- Reserve Bank of India: The central bank of India that has articles and resources explaining the FRBM Act and its implications, directly from the regulator’s point of view.
- Indian Economy: An Indian online resource dedicated to explaining economic and financial terms relevant to India, including FRBM.
- The Balance: A comprehensive personal finance resource offering advice on investing, saving and budgeting. It has a wide range of articles which may include the full form of FRBM and related information.
