The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, was designed as a “legal leash” on public spending for both the central and state governments. While the Union Government passed its own legislation, it advised states to enact parallel laws, backed by a carrot-and-stick approach. Most states followed suit, enacting their own fiscal responsibility legislation in line with the central FRBM framework and adhering to Finance Commission parameters.
However, it is important to note that the Act is technically non-justiciable, meaning you cannot sue the government in a civil court for failing to meet its targets. Instead of traditional “penalties,” the Act uses a system of transparency, legislative oversight, and specific “escape routes” to handle violations. Section 4 of the Act provides for the escape clause to be invoked in case of war, natural disasters, collapse of agriculture, structural changes in the economy, severe economic downturn etc. In such a scenario when the target is missed, the Finance Minister has to lay a statement before the legislature indicating reasons thereof and the fiscal correction path.
The Act mandates that the government review its trends in receipts and expenditures every six months and present this to legislature.
The Comptroller and Auditor General (CAG) of India performs an annual compliance review.
If the government uses “off-budget borrowings” (borrowing through state-owned companies to keep debt off the main books), the CAG highlights these in its reports. While this doesn’t lead to a fine, it creates a Market Pressure.
International rating agencies (like Moody’s or S&P) may downgrade India’s credit rating, making future borrowing more expensive. Public and political criticism for “window dressing” the accounts is inevitable.
Interestingly, Section 11 of the FRBM Act explicitly bars civil courts from having jurisdiction over any matter related to the Act. This means the government cannot be legally punished by a judge for failing to manage the budget effectively. The ultimate “punishment” is intended to be Inflationary pressure (due to high deficits), crowding out of private investment and voter dissatisfaction at the next election.
In the initial years of enactment of FRBM Act the central as well as the state governments were quite eager to follow the fiscal targets without much deviation. The successive Finance Commissions as well as the CAG periodically reviewed the implementation of the FRBM targets both at the national and sub-national levels. The global financial crisis in 2008 created a situation where it became increasingly difficult to adhere to the FRBM targets. Again the Corona pandemic a few years later made an adverse impact on the economy and the central and the state governments had to accommodate the demands on the economy sacrificing the FRBM mandates.
The biggest defaulter was found to be the Union Government.
To discuss how the FRBM Act “targets” were violated, it is helpful to look at the 2026 update to India’s fiscal strategy. As of the Union Budget 2026-27, the government has transitioned from rigid “violation” triggers to a more flexible “Debt-to-GDP” glide path.
Here is a deeper look at the mechanisms used to handle deviations and the current fiscal roadmap. Historically, the FRBM Act mandates with a specific number: a 3% Fiscal Deficit. However, the pandemic made this impossible. In the latest 2026-27 budget cycle, the government has officially shifted its primary “target” from a fixed deficit percentage to a Declining Debt-to-GDP Ratio. The government aims to reduce central debt to 50% of GDP by 2030-31 (down from approximately 56% in 2026). A violation is no longer just “missing 3%,” but rather any fiscal action that put
s the debt on an upward trajectory rather than a downward one. Since the government cannot be taken to court, the FRBM Act uses the Institutional Embarrassment and Market Discipline as its primary enforcement tools.
Here’s a factual overview of alleged and documented violations, deviations or shortcomings of the FRBM Act, 2003, by the Indian government.
a) Repeated Missing of Fiscal Deficit Targets
Under the FRBM Act, the Centre was originally required to reduce and limit its fiscal deficit to 3% of GDP by March 31, 2009. The targets were not met on schedule and were repeatedly extended, suspended, or revised through amendments or changes in rules. For example, the target of 3% was shifted to March 2020–21 and then the framework was relaxed to aim for a glide path toward less than 4.5% of GDP by 2025–26 in recent Budgets. Independent evaluations (CAG and policy research) show that fiscal deficit has routinely exceeded the original FRBM limit (fiscal deficit around 5%+ of GDP in several recent years).
Even though the Act allows flexibility under escape clauses, repeatedly missing statutory targets has eroded the discipline the law intended to enforce. 
b) Frequent Use of Escape Clauses Without Clear Enforcement
The FRBM Act and its amendments include an escape clause that permits the government to deviate from fiscal targets in exceptional circumstances such as national security issues, economic slowdowns and natural disasters. The escape clause has been used frequently, effectively weakening the Act’s constraints rather than treating deviations as exceptional. Critics argue that this flexibility, without a strong institutional mechanism to enforce return to targets, has made the FRBM framework largely guideline-like rather than binding. 
c) Suspension of Targets and Amendment of Key Provisions
Over the past two decades, the FRBM framework has undergone changes that diluted its original statutory discipline. The elimination of strict revenue deficit and effective revenue deficit targets, narrowing the focus mainly to fiscal deficit. The postponement or suspension of deadlines (during the 2008 global financial crisis, and again during the COVID-19 pandemic) have been legally sanctioned, but critics describe them as de facto violations of the spirit of the Act. 
d) Debt Levels Higher than Prescribed Limits
The FRBM Act’s medium-term objectives include limiting general government debt to 60% of GDP and central government debt to 40% by 2024–25. Independent reports (CAG and policy research) show total public debt (Centre + states) is significantly above 60% of GDP and central government debt is near or slightly below the limit, but the broader public debt remains high.While technically many countries exceed arbitrary debt thresholds, not achieving the legally stated targets is cited as a breach of the Act’s framework.
e) Weak Transparency and Disclosure Practices
Independent commentators and audit bodies have argued that some government accounting practices — such as off-budget borrowings, footnotes and treatment of certain liabilities, or the way external debts are reported — are at odds with the transparency goals of the FRBM Act. 
Although the Act itself does not criminalise poor accounting, such practices are presented by watchdogs as violations of the Act’s intent to provide clear information for fiscal decision-making.
f) Lack of Enforcement Mechanisms
A structural “violation” attributed to the FRBM framework isn’t so much a single act of disobedience, but the fact that the law lacks strong enforcement means that there are no penalties if fiscal targets are missed. Deviations are primarily justified through escape clauses or amended targets rather than corrective actions.
This has led economists and policy analysts to treat the system as more of a commitment device than a binding legal constraint. Time has come to revisit the FRBM protocols and devise a more comprehensive approach to dealing effectively with the fiscal discipline in government sector.