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How to curb irresponsibility

  • Published
    8th Sep, 2023


There is a need to envision better ways for Parliament to write a fiscal responsibility law for lawmakers.

Challenge of Fiscal Responsibility Law

  • Political Overspending: Ruling parties tend to overspend to secure future electoral victories, leading to fiscal issues down the line.
  • Deferred Taxation: The practice of excessive spending today ultimately translates into increased taxes for citizens in the future.
  • Global Models: Countries like Germany and the U.S. implement fiscal mechanisms (e.g., debt brake, debt ceiling) to restrict borrowing and effectively manage debt levels.

Flaws in India's Fiscal Responsibility Law

  • FRBM Act's Introduction: Instituted in 2003, the Fiscal Responsibility and Budget Management Act aimed to rein in excessive deficits.
  • Amendments Weakening Targets: Frequent legislative changes, facilitated through Finance Acts, erode the original fiscal targets set by the FRBM Act.
  • Constitutional Barriers: The classification of the Finance Bill as a money bill grants the executive government the authority to modify FRL provisions, circumventing parliamentary scrutiny and debate.

Parliamentary Constraints and Solutions

  • Anti-Defection Law's Limitations: MPs cannot vote against party wishes. Voting down the Finance Bill, vital for fiscal control, is a nuclear option.
  • The Flawed Concept of Money Bill: Considered the ultimate escape clause, regardless of fiscal rule's design, hindering fiscal responsibility.
  • Need for Fiscal Institution Building: Instead of an FRL as Parliamentary law, focus should be on robust fiscal institutions to ensure responsibility.
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