Why FRBM failed

Fiscal responsibility legislation that does not constrain the Budget process is irrelevant

India has a chronic fiscal problem. Economists have worked for 20 years on designing and enacting parliamentary law that would constrain Budgets. This enterprise suffers from a fatal problem: The notion of ‘money Bills’ in the Constitution of India. The money Bill route makes evading fiscal responsibility as easy as enacting the Budget. In order to constrain Budgets, we have only two viable pathways: (a) Putting fiscal responsibility clauses into the Constitution and (b) Unmuzzling the bond market.

India has a long-term problem with deficits. Sound public finance involves running a small primary surplus in most years, and occasionally running