Fiscal Responsibility and Budget Management Rules, 2004

USS He Fhe Wee-33004/99 REGD. NO. D.L.-3300499 Che Gazette of India EXTRAORDINARY PUBLISHED BY AUTHORITY a. 280] 7 feeei, yaa, Yong 2, 2004/seTe 11, 1926 No. 280] NEW DELHI, FRIDAY, JULY 2, 2004/ASADHA 11, 1926 ' (aiff ert Rem) arpa ARTA. 395(a1).— Sat eer, aafadta srenfne ait sare wee afta, 2003 (2003 I 39) St IT 1 A Sa-8TT (3) SRI IaH Mfr an wir eal Ee, aha s Gere, 2004 wi sa ante a Be F Fad aot 8, ferret sad afar wee ehT | [w. &. 7(3)-3S1)/2003] MINISTRY OF FINANCE (Department of Economic Affairs) NOTIFICATION New Delhi, the 2nd July, 2004 , G.S.R. 395(E).—Iin exercise of the powers conferred by Sub-section (3) of Section 1 of the Fiscal ~ Responsibility and Budget Management Act, 2003 (39 of 2003), the Central Government hereby appoints the 5th day of July, 2004 as the date on which the said Act shall come into force. afer 1. fee ae afk gree - (1) #7 Pert or cia am wafitta caeafiea ae aoe wer Prom, "2004 8 | () “sfafan” @ wofedte cafe ate are ude afer, 2003 (2003 &T 39) aftnta 2 ; ‘ . - QO . 2031 GI/2004 (a) “arr @ ga afifar at arr afta 2 ; ofafiaa 4 ckurita & ad oof att at oe afdfrre a f | 3. afta oex.- 2004-2005 W RH et ae wee fata at & sie Fo wma way vars 0.5 few a after & wager Br | 2) ee wer we fia we a Wha 8 at eet of fete af (3) asta wenn fata a 2004-2005 8 fet fa af 8 ware akg were 0.5 wisest W afer at feet wher at weamafe vel Saft Bere & 9 wiesa S ars ger we wel, wea wq vere & 9 wea at ag anftres we ar fraxor .- ani wet @ aaa wo é fae ota weranfis wafade A Peer Ha t= (i) Wee Re sere at wera B wr A wa we ; (ii) Wea Bel sere at wera B wa A aX mae ; silk (2) met a2 wrote AY afte Peer a after cer sik que wept 8 waite sifted sk ary & wera or Prater ey & fore sigrnfle aes at at | [at aos 3()] ANT Hl USA: ATR e. weea- (1) Se won, ate fea F aot wafedta theaail 4 sie afte greta a yPitaa met & fay afte facta flaw alle sega er APT Wega. ae waa, Preafeed a ret Sei - =) Ra aahhte ddast A coor B waits we @ a waite (2) wuts (1) & ouddt a argurert fata af 2006-2007 & fery arity fata 7. she Gear & fey oura.- fata a 2004-2005 S ater art aret ferett feria ad at gent fora ait fare a wha & Prepst @ ae afta dar & fe- @) pa fraray WR were wifes Ga at H aoe wreHorst G aretha wha Gees a Gi) Sa ay @ fey wofteiy cer axe premat @ ore was a afta =; a (@) frat Harare ot ues aa, gat ar at anf S gla wea o wa ae Wit fora orgert & fey syn abi ar faarateor fey wel or mena & aie ve feta af & woreda ae & fay drensit or ahr 8a gy dae d al aeat i wert wer | wea (Prat 4 &ftay) mea aiferas wrote fe feat ara at arial ay or wea: | one et ast & fare ae aartera GAC WHS, as +4 m+ WEBS ag 4. 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Short title and commencement .- (1)These rules may be called the Fiscal Responsibility and Budget Management Rules, 2004, (2) They shall come into force on the 5™ day of July, 2004. 2, Definitions .- In these rules, unless the context otherwise requires, - (a)"Act” means the Fiscal Responsibility and Budget Management Act, 2003 (39 of 20033; (b)"Ferm” means a form appended to these ruies; (c) “GDP” means gross domestic product at current prices; (d) “section” means a section of the Act; (e}words and expressions used herein but not defined and defined in the Act shall nave the meanings respectively assigned to them in the Act. 3, Annual targets .- (1) In order ta achieve the target of revenue deficit as set out in sub-section (1) of section 4, by the 31° day of March, 2008, the Centra’ Govérnment shall reduce such deficit by an amount equivalent to 0.5 per cent or more of the GDP at the end of each financial year, beginning with the financial year (2) The Central Government shall reduce the fiscal deficit by an amount equivalent to 0.2 per cent or more of the GDP at the end of each financial gett ley’ year beginning with the financial year 2004-2005, so that fiscal deficit is brought down to not more than 3 per cent of GDP at the end of 31% day of March, 2008, {3} The Centra! Government shall not give guarantees aggregating to an amount exceeding 0.5 per cent of the GDP in any financial year beginning with the financial year 2004-2005. (4) The Central Government shall not assume additional liabilities (including external debt at current exchange rate) in excess of 9 per cent of GDP for the financial year 2004-2005 and in each subsequent financial year, the limit of 9-per cant of GDP shail be progressively reduced by at least one percentage point of GDP. 4, Medium Term Fiscal Policy Statement, Fiscal Policy Strategy Statement and Macro Economic Framework Statement .- The Medium Term Fiscal Policy Statement, Fiscal Policy Stratecy Statement and Macro-Economic Framework Statement required to be laid before botn Houses of Parliament by the Central Government along with the annual financial statement and demands for grants shall be in Forms F-i, F-2 and F-3 respectively. 5. Fiscal Indicators .- (1) In the Mecium Term Fiscal Policy Statement, . three year roiling targets in respect of the following fiscal indicators shall be as given in Form F-1, namely:- (i) revenue deficit as a percentage of GDP; (ii) fiscal deficit as a percentage of GDP; (lii} tax revenue as a percentage of GDP; and {iv} total outstanding liabilities of the Central Government as a percentage of GDP. (2} The Fiscal Policy Strategy Statement in Form F-2 shall also contain the intra-year benchmarks for assessing the trends in receipts and expenditure relating to annual targets and Budget Estimates. 6. Disclosures .~ (1) In order to ensure greater transparency in its fiscal operation in the public interest, the Central Government shall, at the time of presenting the annual financial statement and demands for grants, make disclosures of the following:- , (a) any significant change in accounting standards, policies and practices affecting or likely to affect the computation of prescribed fiscal indicators. (b) — statements of receivables and guarantees in Forms D-1 to D-3. (c) a statement of assets in Form D-4. (2) The provisions of sub-rule (1) shail be complied with not later than with the presentation of the annual financial statement and demands for grants for the financial .year 2006-2007. 7. Measures to enforce compliance .- In case the outcome of the quarterly review of trends in receipts and expenditure, made under sub-section (1) of section 7, at the end of second quarter of any financial year beginning with the financial year 2004-2005 shows that - . (i) the total non-debt receipts are less than 40 per cent of Budget Estimates for that year; or (ii) the fiscal deficit is higher than 45 per cent of the Budget Estimates for that year; or (iii) the revenue deficit is higher than 45 per cent of the Budget Estimates for that year, then, - (a) as required under sub-section (2) of that section, the Central Government shall take appropriate corrective measures; and (b) as required under sub-section (3) of that section, the Minister-in-charge of the Ministry of Finance shall make a statement in both Houses of Parliament during the session immediately following the end of the second quarter detailing the corrective measures taken, the manner in which any supplementary demands for grants are proposed to be financed and the prospects for the fiscal deficit of that financial year. Form F-1 [ See rule 4 ] MEDIUM TERM FISCAL POLICY STATEMENT Fiscal Indicators — Rolling Targets Current Ensuing year Targets for next ; Year Target: Two years | Revised Budget | Estimates Estimates | , Revenue Deficit as percentage of GDP . Fiscal Deficit as percentage of GDP . Tax Revenue as percentage of GBP . Total Outstanding Liabilities as percentage. of GDP : i B. Assumptions underlying the Fiscal Indicators - Revente receipts (a) Tax-revenue - Sectorai and GDP growth rates (b) Non-tax-revenue — Policy stance (c) Devolution to States - Finance Commission Capita! receipts — Debt stock, repayment, fresh loans and policy stance (a) Recovery of loans (c} Borrowings - Public Debt and Other Liabilities Total expenditure ~ Policy Stance (a} Revenue account (i) Interest payments (iii} Others (i) Loans and advances GDP Growth C. Assessment of sustainability relating to - (1) The balance between revenue receipts and revenue expenditure, The Medium Term Fiscal Policy Statement may specify the tax-GDP ratio for the current year and subsequent two years with an assessment of the changes required for achieving it. It may discuss the non-tax revenues and the policies concerning the same. An assessment of the capital receipts may be . made, including the borrowings and other liabilities, as per policies spelt out. The statement may also give projections for GDP and discuss it on the basis of assumptions underlying the indicators. Expenditure on revenue account, both pian and non-plan, may also be made with particular emphasis on the measures proposed to meet the overall objectives. (ii) The use of capital receipts including market borrowings for generating productive assets. The Medium Term Policy Statement may specify the proposed use of capital receipts for generating productive assets in different categories. It may also spell out proposed changes among these categories and discuss it in terms of the overall policy of the Government in achieving the national objective. Form F - 2 [ See rule 4 ] FISCAL POLICY STRATEGY STATEMENT A : Fiscal Policy Overview: [This paragraph will present an overview of the fiscal policy currently in vogue. ] , B : Fiscal policy for the ensuing financial year: [This paragraph shall have five sub-paragraphs dealing with - (1) Tax Policy In the sub-paragraph on tax policy, major changes proposed to be introduced in direct and indirect taxes in the ensuing financial year will be presented. It shall contain an assessment of income tax exemption limits and how far it relates to per capita income, principles regarding tax exemptions and target group for exemptions. (2) Expenditure Policy Under expenditure policy, major changes proposed in the allocation of expenditure shall be indicated. It shall also contain an assessment of principles regarding the benefits and target group of beneficiaries. (3) Government Borrowings, Lending and Investments. In this sub-paragraph on Government borrowings, the policy relating to internal debt, external debt, Government jending, investments and other 201 GLLOY-S 18 THE.GAZETTE OF INDIA : EXTRAORDINARY [Part Il—Sec. 3(i)] activities; including principles regarding average maturity structure, bunching of repayments, etc., shall be indicated. (4) Contingent and other Liabilities. Any change in the policy on contingent and other liabilities and in particular guarantees which have potential budgetary implications shall be indicated. (5) Pricing of Administered Goods, Any-change proposed in the pricing of administered products, including the progress towards market-based principles shall be spelt out.] C : Strategic priorities for the ensuing year: [(1) Resource mobilization for the ensuing financial year through tax, non-tax and other receipts shail be spelt out. (2) The broad principles underlying the expenditure management during the ensuing year shall be spelt out. (3) Priorities relating to management of public debt proposed during the ensuing year shall be indicated. ] D : Rationale for Policy changes : [(1) The rationale for policy changes consistent with the Medium Term Fiscal Policy Statement, in respect of direct and indirect taxes proposed in the ensuing Budget shall be spelt out. (2) The rationale for major policy changes in respect of budgeted expenditure including expenditure on subsidies shall be indicated. (3) Rationaie for changes, if any, proposed in the management of the public debt shal! be indicated. . (4) The need for changes, if any, proposed in respect of pricing of administered goods shall be spelt out.] E : Targets for the ensuing year . [At the end of the second quarter, a mid-year assessment shall be made of the trends in receipts and expenditures and achievement of targets ‘of deficit reduction in relation to Budget Estimates. In case the total non- debt receipts are less than 40 per cent of Budget Estimates for that year; or the fiscal deficit is higher than 45 per cent of the Budget Estimates for that Tapas 3] Ona FST: TUE year; or the revenue deficit is higner than 45 per cent of the Budget Estimates for that year, the Central Government shall take action as required ; under sub-sections (2) and (3) of section 7.] [This paragraph shall contain an evaluation of the changes proposed in the fiscal policy for the ensuing year with reference to fiscal deficit reduction and objectives set out in the medium term fiscal policy statement. ] Form F - 3 [ See rule 4 ] MACRO ECONOMIC FRAMEWORK STATEMENT 1. Overview of the Ecohomy: [This paragraph shall contain a synoptic analysis of trends in growth rates, prices, output, external sector, money and capita! markets. Information on key macro-economic indicators will be presented in the format appended. ] 2. GDP Growth: [This paragraph shall contain an analysis of trends in overall GDP growth and its sectoral composition. ] 3. External Sector: [Under this paragraph, trends in exports, imports, . foreign exchange reserves, current account balance and balance of payments shall be presented. ] 4, Money, Banking and Capital Markets: [This paragraph shall present an account of the trends in money supply, bank deposits and credit and developments in the capital market. ] 5. Central Government Finances: [Under this paragraph an analysis of trends in revenue collections and expenditure shall be presented. Trends in Important fiscal deficit and debt indicators shall also be presented. Trends in Central Government finances shall be presented in the format appended. | 6. Prospects: [Based on the trends in major sectors presented in the previous sections, an assessment shell be made regarding the growth prospects, along with the underlying assumptions. ] Macro Economic Framework Statement Economic Performance at.a Glance Absolute Value Percentage Changes Previous Current Previous Current Year Year Year Year Real Sector 1 GDP at factor cost (a) | at current price (b) | at 1993-94 price 2 Index of Industrial Production 3 Wholesale Price Index (point to point) 14 Consumer Price Index 6 Imports at current prices (a) | In Rs. Crore : (b) | In US $ million 17 Exports at current prices (a) | In Rs. Crore {b) | In US $ million 8 Trade Balance 9 Foreign Exchange Assets (a) | In Rs. Crore (b) | In US $ million 10 | Current Account Balance Government Finances 1 Revenue Receipts 2 Tax Revenue(Net) 3 ‘Non-Tax Revenue 4 Capital Receipts(5+6+7) 5 Recovery of loans 6 Other Receipts 7 Borrowings and other liabilities ; 8 Total Receipts(1+4) * 9 Non-Plan Expenditure 10 | Revenue Account Of which: 11 | Interest payments 12 | Capital Account 13 | Plan Expenditure 14 | Revenue Account 15 | Capital Account 16 | Total Expenditure(9+13) 17 | Revenue Expenditure 18 | Capital Expenditure 19 | Revenue Deficit (17-1) 21 | Primary Deficit (20-11) ' *Data will relate to the period up to which information for the current year is available. To facilitate comparison, data of previous year corresponds to the same period of current year. Accordingly, reporting petiod may vary for different items. (31 1I— are 3(i)] ATT USAT: STATA Form D-1 [ See rule 6 ] TAX REVENUES RAISED BUT NOT REALISED (principal taxes) (As at the end of the reporting year) Amounts under dispute Amounts not under dispute Major | Description Over Over | Over oO Over | Over Head 1 2 5 1 year 2 5 year | years | years years | years _Grand but but but ove r Total put but but ON, Total less less less ° then less fess 1 Total than than than years wo than than years : two 5 10 wo 5 10 years | years | years years years | years Taxes on Income & Expenditure 0020 Corporation Tax 0021 Taxes on Income other than Corporation tax Taxes on Commodities & Services ~ 0037 Customs 0038 | Union Excise 0044 Service Tax TOTAL Note : Reporting year refers to the second year preceding the year for which the annual financial statement and demands for grants are presented. THE GAZETTE OF INDIA ;: EXTRAORDINARY [Parr Il—Src. 3(i)] Form D - 2 { See rule 6 ] ARREARS OF NON-TAX REVENUE (As at the end of the reporting year) Description Amounts pending (Rs. crore) Total Q-1 years 1-2 years 2-3 years above 5 years Fiscal Services Interest receipts OF which From State ‘ Governments and Union Territory Governments From Railways From Departmental Commercial Undertakings From Public Sector & other Undertakings Dividends ana Fiori General Services Police receipts Economic Services Petroleum Cess/Royalty Communications (License Fee) Receipts Other Receipts Total Note : Reporting year refers to the second year preceding the year for which the ’ annual financial statement and demands for grants are presented. [arti — ave 3(i)] AT ST UIA: TAT Form D-3 [ See rule 6 ] Guarantees given by the Government Class Maximum Outstanding Additions Deletions (No. of Amount at the during the (other than Guarantees | Guaranteed | beginning. of _ year invoked) Within during the the year (Rs. crore) during the bracket) year (Rs. crore) year - Invoked during the Outstanding | Guarantee Commission Other year at the end or-Fee Material (Rs. crore) of the year | (Rs. crore) Details Discharged Not (Rs. crore) | Receivable Received discharged Note: The year in the above table refers to the second year preceding the year _ for which the annual financial statement and demands for grants.are presented. Form B-4" ASSET REGISTER [Parr ll—Ssc. 3] Assets at the beginning of the reporting year Assets acquired during the:reporting -}: - Cumulative total of assets at the end of the reporting year Physical assets: Land Building Office Residential Roads Bridges Irrigation Projects Power projects Other capital projects Machinery & Equipment Office Equipment Vehicles Total Financial assets: Equity Investment Shares Bonus shares Loans and advances Loans to State & UT Govts. Loans to Foreign Govts. Loans to companies Loans.to others Other financial investments - Total Notes: 1. Assets above the threshold value of Rupees two lakh only to be recorded. 2. This disclosure statement does not include assets of Cabinet Secretariat, Central Police Organizations, Ministry of Defence, Departments of Space and Atomic Energy. 3. Reporting year refers to the second year preceding the year for which the annual financial statement and demands for grants are presented. 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