UPSC Prelims 2020 Q6: Indian Economy – Fiscal Policy & Budget
- (a) Long standing parliamentary convention
- (b) Article 112 and Article 110(1) of the Constitution of India
- (c) Article 113 of the Constitution of India
- (d) Provisions of the Fiscal Responsibility and Budget Management Act, 2003
Answer: (d) Provisions of the Fiscal Responsibility and Budget Management Act, 2003
Explanation
Macro Economic Framework Statement: Constitutional Mandate
| Potential Source | Is it the mandate for MEFS? |
|---|---|
| Parliamentary convention | No legal backing |
| Article 112 (Budget) + Article 110(1) | Budget procedure but not MEFS specific |
| Article 113 (Fiscal Responsibility & Budget Management) | NO - Article 113 is procedural |
| FRBM Act 2003 | YES - Section 3(1) requires MEFS |
Fiscal Responsibility and Budget Management Act, 2003 (Section 3) mandates that the Union Government present the Macroeconomic Framework Statement along with the Budget.
FRBM Act requires three documents: (i) Macroeconomic Framework Statement, (ii) Medium-term Fiscal Policy Statement, (iii) Fiscal Policy Strategy Statement. These provide transparency and accountability on fiscal management.
Answer: (d) Provisions of the FRBM Act, 2003.
Why each option is right or wrong
- (a) Incorrect. Convention has no legal force - FRBM Act is the legal mandate.
- (b) Incorrect. Articles 112 and 110 outline budget procedure, not MEFS requirement.
- (c) Incorrect. Article 113 is about budget allocation, not MEFS mandate.
- (d) CORRECT. FRBM Act, 2003 Section 3(1) mandates presentation of Macroeconomic Framework Statement along with the Budget.
Key point
FRBM Act 2003 Section 3: Three mandatory statements with Budget: (i) Macroeconomic Framework Statement, (ii) Medium-term Fiscal Policy Statement, (iii) Fiscal Policy Strategy Statement. These ensure fiscal transparency and rule-based governance.
Remember
The Macroeconomic Framework Statement is presented because it is mandated by the Provisions of the Fiscal Responsibility and Budget Management Act, 2003, specifically Section 3(1). This ensures fiscal transparency and medium-term economic planning.
Common mistakes
- Confusing Article 113 with FRBM Act requirements. Article 113 is about appropriation, not MEFS.
- Assuming parliamentary convention suffices for MEFS. A statutory mandate (FRBM Act) is required.
- Missing the purpose of MEFS - to provide medium-term economic context (3-year outlook) for the budget.
Exam tip
FRBM Act 2003 Purpose: Impose fiscal discipline on governments to limit deficit and debt. Three statements required: MEFS (macroeconomic outlook), MTFP (fiscal targets 3 years), FPSS (fiscal policy strategy). If breached, government must explain to Parliament.
Sources
- Fiscal Responsibility and Budget Management Act, 2003 - Section 3
- Union Budget Manual - Presentation Documents