Consider the following statements: 1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20

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Q: 24 (IAS/2018)
Consider the following statements:
1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Government.
2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Government.
3. As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the letter.
Which of the statements given above is/are correct?

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,83,93,38,33,83,22

keywords: 

{'debt': [0, 0, 0, 1], 'fiscal responsibility': [0, 0, 2, 0], 'loan': [1, 0, 1, 6], 'outstanding liabilities': [0, 0, 0, 1], 'domestic liabilities': [0, 0, 0, 1], 'gdp': [0, 0, 0, 1], 'budget management': [0, 0, 2, 1], 'gdp ratio': [0, 0, 0, 1], 'central government': [1, 0, 0, 1], 'constitution': [39, 3, 11, 39], 'review committee report': [0, 0, 0, 1], 'state government': [0, 0, 1, 0], 'frbm': [0, 0, 2, 1], 'government': [5, 0, 0, 1], 'consent': [1, 0, 0, 0]}

The correct answer to the question is Option 3: 1 and 3 only.

Explanation:

Statement 1 is correct. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report, chaired by N.K. Singh, has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Government. The committee was constituted by the Government of India in 2016 to review the implementation of the FRBM Act, 2003, and suggest a roadmap for fiscal consolidation.

Statement 2 is incorrect. As per the latest available data, the Central Government`s domestic liabilities as a percentage of GDP were 46.5% at the end of March 2021, while the State Governments` domestic liabilities were 22.2% of GDP. Therefore, the statement that the Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Government is not correct.

Statement 3 is correct. As per the Constitution of India, it is mandatory for a State to take the Central Government`s consent for raising any loan if the former owes any outstanding liabilities to the latter. This provision is enshrined in Article 293 of the Constitution. It is aimed at ensuring that States do not accumulate excessive debt and default on their obligations.

In conclusion, option 3 (1 and 3 only) is the correct answer to the question.

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