- The FRBM Act includes an “escape clause”.
- This allows exceeding annual fiscal deficit targets under certain grounds.
- Grounds include national security, war, national calamity, severe agriculture collapse.
- Also, structural reforms with unanticipated fiscal implications.
- Or, decline in real output growth by at least three percentage points.
- Any deviation under this clause shall not exceed 0.5% of GDP in a year.
- Due to Covid-19, fiscal deficit and debt parameters deviated.
- Government stated it would pursue fiscal consolidation to attain <4.5% of GDP by FY 2025-26.
- It did not propose amendment to FRBM law, retaining fiscal flexibility.