ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Budgetary Rules and Plan Financing

In the approach paper to the Eleventh Five-Year Plan, the Planning Commission has proposed a redefinition of the revenue deficit, concentration only on the primary and fiscal deficits as control variables, and an adjustment of the deficits for cyclical variations in gross domestic product. Importantly, the PC has also questioned the very compatibility of the targets under the Fiscal Responsibility and Budget Management Act with the imperatives of plan expenditure and its phasing over time. All these have drawn adverse criticism from the finance ministry and the Reserve Bank of India. After setting out the basics pertaining to the various budget deficits and the economic reasons for their targeting, this article examines the main issues in the debate among the three policy formulating bodies.

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