Revenue and Capital Expenditure — Policy Reforms

Entry	Year	Description	Impact
N/A (FRBM Act)	2003 (Enactment), 2012 (Amendments), 2015 (Amendments)	While there aren't direct constitutional amendments specifically for expenditure classification, the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, and its subsequent amendments significantly influence how the government manages and reports its expenditure. The Act initially aimed to eliminate the revenue deficit and bring down the fiscal deficit to 3% of GDP by 2007-08. Subsequent amendments, particularly in 2012 and 2015, introduced concepts like 'Effective Revenue Deficit' and provided a revised roadmap for fiscal consolidation, acknowledging the need for flexibility during economic downturns.	The FRBM Act's targets, especially for the revenue deficit, implicitly push the government to prioritize capital expenditure over revenue expenditure when borrowing. By aiming to eliminate the revenue deficit, the Act ensures that borrowed funds are primarily used for asset creation rather than financing day-to-day consumption, thereby improving the quality of government spending and promoting long-term economic stability. The N.K. Singh Committee (2016) further reviewed the FRBM framework, suggesting a debt-to-GDP ratio target, which also impacts expenditure planning.