Topic Details (Notes format)

Finance Ministry and Fiscal Responsibility

Subject: Polity

Book: Indian Polity by M. Laxmikanth

At the Union level, the Finance Ministry crafts budgetary policies, mobilizes resources, and manages public debt. The FRBM Act (2003) mandates fiscal discipline—limiting fiscal deficit, controlling borrowings, and ensuring medium-term fiscal frameworks. States have parallel FRBM laws. These measures aim at macroeconomic stability, reducing inflationary pressures, and facilitating growth. However, off-budget liabilities and populist schemes sometimes strain compliance. Union-states coordinate borrowing limits, guided by Finance Commission recommendations. The ministry’s regulatory role extends to banking and insurance. Mastering these aspects clarifies the governance of public finances, crucial for stable economic conditions under India’s democratic setup.

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