FRBM Act, 2003
Fiscal Rules and State Borrowing
The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was enacted by the Central Government to impose rules-based fiscal discipline. States also have their own FRBM Acts, which cap borrowing and deficit levels.
- Central Government target under FRBM: Fiscal deficit of 3% of GDP (the glide path has been revised several times post-COVID)
- State FRBM limits: States are generally restricted to a fiscal deficit of 3% of GSDP; additional 0.5% borrowing permitted if power sector reforms are completed (Article 293 governs state borrowing)
- Article 293 of the Constitution: States must obtain Centre's consent to borrow if they are indebted to the Centre; this gives the Centre leverage over state borrowing
- Tamil Nadu's fiscal deficit: Has remained near the 3% GSDP ceiling; its debt-to-GSDP ratio has exceeded 25%, limiting additional borrowing capacity
- Net Borrowing Ceiling: The Centre sets annual net borrowing ceilings for each state under its Article 293 powers; states have alleged that the Centre uses this tool to tighten their fiscal space beyond FRBM norms
● Tracked since February 02, 2026 · last seen June 22, 2026 · updates as the daily brief publishes
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