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Q9 (IAS/2018) Economy › Government Finance & Budget › FRBM framework Official Key

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 Governments. 2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments. 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 latter. Which of the statements given above is/are correct ?

Result
Your answer: —  ·  Correct: C
Explanation

The correct answer is option C (statements 1 and 3 only).

**Statement 1 is correct:** The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt-to-GDP ratio of 60 per cent for the general (combined) Government by 2023, comprising 40 per cent for the Central Government and 20 per cent for the State Governments.[1]

**Statement 2 is incorrect:** The statement reverses the actual figures. The Central Government's domestic liabilities were significantly higher than the State Governments' liabilities, not 21% versus 49% as claimed in the statement. This makes statement 2 factually wrong.

**Statement 3 is correct:** A state cannot raise any loan without the consent of the Centre, if there is still outstanding any part of a loan made to the state by the Centre or in respect of which a guarantee has been given by the Centre.[2] This constitutional requirement under Article 293 makes it mandatory for states with outstanding Central liabilities to seek permission before borrowing.

Therefore, only statements 1 and 3 are correct, making option C the right answer.

Sources
  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c} > p. 126
  2. [2] Laxmikanth, M. Indian Polity. 7th ed., McGraw Hill. > Chapter 15: Centre State Relations > I Borrowing by the Centre and the States > p. 157
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Consider the following statements : 1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a …
At a glance
Origin: Mixed / unclear origin Fairness: Moderate fairness Books / CA: 6.7/10 · 0/10
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Statement 1
Did the FRBM Review Committee Report recommend a combined (general) government debt‑to‑GDP target of 60% by 2023, with 40% for the Central Government and 20% for State Governments?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Major Recommendations of the N. K. Singh Committee: > p. 116
Presence: 5/5
“• To enact the Debt and Fiscal Responsibility Act by repealing the existing FRBM Act. 1.• 2. To consider debt as the new fiscal policy parameter instead of fiscal deficit. In this regard, combined debt of Centre and States to be targeted. • 3. To reduce overall Government debt to 60 per cent by 2022-23 with 40 per cent threshold for the centre and 20 per cent for the states altogether (against the existing 49% target)”
Why this source?
  • Explicitly states the committee's recommendation to reduce overall government debt to 60% by 2022-23 with a 40% threshold for Centre and 20% for States.
  • Mentions this allocation (40% Centre, 20% States) as the combined target, directly matching the statement's substance.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c} > p. 126
Presence: 4/5
“The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt-to-GDP ratio of 60 per cent for the general (combined) Government by 2023, comprising 40 per cent for the Central Government and 20 per cent for the State Governments. Which of the statement(s) given above is/are correct? • (b) 2 and 3 only • (a) 1 only • (d) 1, 2 and 3 • (c) 1 and 3 only”
Why this source?
  • Directly asserts the FRBM Review Committee recommended a 60% general government debt ratio by 2023, comprising 40% Centre and 20% States.
  • Language mirrors the statement's numbers and timeline, providing corroborative support.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Government Budgeting > p. 188
Presence: 4/5
“Consider the following statements: [2018] • (i) 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 Governments.• (ii) The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.• (iii) 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.”
Why this source?
  • Contains the same formulation listing a 60% general government target with 40% Centre and 20% States by 2023 as a stated proposition.
  • Serves as an additional source echoing the recommendation's numbers and deadline.
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Statement analysis

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