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18 June 2026 3 views

FRBM Review Committee (2019) — State Debt Benchmarks

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theIAShub
18 Jun, 2026
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FRBM Review Committee (2019) — State Debt Benchmarks
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High-level committee that revised fiscal consolidation roadmap for Centre and States — set benchmark debt-to-GDP ratios for sustainable public finance.

Why in News

Tamil Nadu's mounting debt burden of Rs 13.18 lakh crore and simultaneous farm loan waiver announcement has rekindled focus on FRBM limits and state debt sustainability benchmarks recommended by the FRBM Review Committee (2019).

Key Facts

  • FRBM Act: Fiscal Responsibility and Budget Management Act enacted in 2003 to institutionalize fiscal discipline and reduce public debt. (UPSC Mains Usage: GS3 — Government Budgeting — Fiscal Consolidation)
  • FRBM Review Committee (2019): Chaired by K. Singh, submitted comprehensive recommendations on fiscal consolidation roadmap.
  • State Debt Benchmark: Committee recommended States maintain debt-to-GDP ratio at 20% for sustainable fiscal health.
  • Current State Debt Levels: Outstanding debt of states currently hovering around 27–29% of GDP, significantly above the 20%
  • Fiscal Deficit Ceiling: States bound by FRBM limits capping fiscal deficit at 3% of GSDP (Gross State Domestic Product).
  • Revenue vs. Capital Expenditure: To accommodate sudden waiver expenditures (classified as revenue expenditure), states invariably slash capital outlays — often by nearly 1/3rd. (UPSC Mains Usage: GS3 — Public Finance — Capital vs. Revenue Expenditure trade-offs)
  • Off-Budget Borrowings: To circumvent strict FRBM ceilings, states resort to opaque borrowings through Special Purpose Vehicles (SPVs) or public sector undertakings.

Quick Revision Box

Term

Detail

FRBM Act

Enacted 2003, institutionalizes fiscal discipline and public debt reduction

FRBM Review Committee

Chaired by N.K. Singh, submitted report in 2019

State Debt Benchmark

Recommended 20% of GDP for state debt sustainability

Current State Debt

Hovering around 27–29% of GDP, above recommended threshold

Fiscal Deficit Ceiling

3% of GSDP for state governments

Off-Budget Borrowings

Opaque borrowings via SPVs to bypass FRBM limits


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