View: India needs new fiscal rules targeting the interest-revenue ratio

The Fiscal Responsibility and Budget Management (FRBM) Act of 2003 aimed for prudence and stability by reducing the Centre’s fiscal deficit (FD) to 3% of GDP by 2008. Alas, the Great Recession struck, forcing a huge expansion of the deficit to support the sinking economy. It proved politically impossible to return to the 3% target, despite much budgetary fudging.Meanwhile, an FRBM Review Committee proposed a new target: reducing the ratio of