Economic Survey calls for fiscal flexibility for the Centre, cautions States against worsening finances
GS3Economy · S&T · Environment · Security· Fiscal policy, budget & taxation (GST)· Prelims + Mains·
Why in news
The Economic Survey 2025-26, authored by Chief Economic Advisor V. Anantha Nageswaran, recommended delaying strict fiscal targets under the FRBM Act due to global volatility.
Background
The survey suggests maintaining the current framework of bringing down the debt-to-GDP ratio to 50% with a leeway. It proposes revisiting the rule-based regime after five years once global uncertainty subsides and debt/deficit ratios are closer to targets.
Facts for Prelims
- Report / IndexEconomic Survey 2025-26 authored by Chief Economic Advisor V. Anantha Nageswaran
- FactTarget debt-to-GDP ratio: 50% with a leeway
- Act / BillFiscal Responsibility and Budget Management (FRBM) Act
For Mains
Q. Discuss the trade-offs between maintaining strict fiscal discipline under the FRBM Act and the need for fiscal flexibility during periods of global economic volatility.
Dimensions to cover in your answer
- Fiscal-Monetary coordination: Balancing deficit reduction with the need for counter-cyclical spending during global shocks
- Federal fiscal friction: Balancing state-level spending requirements with the Centre's mandate for national fiscal credibility
Keywords: fiscal deficit · debt-to-GDP ratio · FRBM Act · fiscal credibility · counter-cyclical spending
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