What is the FRBM Act?Fiscal Responsibility Budget management Act! . The FRBM Act was enacted by Parliament in 2003 to bring in fiscaldiscipline. It received the President’s assent in August the same year.As Parliament is the supreme legislative body, these will bind thepresent finance minister Sri.Pranab Mukerjee, and also future financeministers and governments. .How will it help in redeeming the fiscal situation? . The FRBM Rulesimpose limits on fiscal and revenue deficit. Hence, itwill be the duty of the Union government to stick to the deficittargets. As per the target, revenue deficit, which is revenueexpenditure minus revenue receipts, haveto be reduced to nil in fiveyears beginning2004-05.Each year, the government is required to reduce the revenuedeficit by0.5% of the GDP. . The fiscal deficit is required to be reduced to 3% of the GDP by 2008-09.It would mean reduction of fiscal deficit by 0.3 % of GDP everyyear.How are these targets monitored?. The Rules havemid-year targets for fiscal and revenue deficits. TheRules required the government to restrict fiscal and revenue deficit to45% of budget estimates at the end of September (first half of thefinancial year.) .In case of a breach of either of the two limits, the FM will berequiredto explain to Parliament the reasons for the breach, thecorrective steps,as well as the proposals for funding the additionaldeficit.What is fiscal deficit?.Every governmentraises resources for funding its expenditure. Themajor sources for funds are taxes and borrowings. Borrowings couldbefromthe Reserve Bank of India (RBI), from the public by floatingbonds, financial institutions, banks and even foreign institutions. These borrowings constitute public debt and fiscal deficit is a measureof borrowings by the government in a financial year.In budgetary arithmetic, it is total expenditure minus the sum of revenue receipts, recoveries of loans and other receipts.