Recently, the Ministry of Finance has conveyed its inability to release the Medium-Term Expenditure Framework (MTEF) statement, mandated by the Fiscal Responsibility and Budget Management (FRBM) Act of 2003.

• The ministry had cited “unprecedented global uncertainties that may adversely affect medium-term projections” to justify not placing fiscal projections for 2024-25 and 2025-26 in Parliament at the time of presenting the Union Budget.

Ministry of Finance Unable to Release MTEF

• Since the presentation of the Union Budget for FY 2023-24 in February, there has not been any significant and favourable changein global headwinds and associated risks.
  • Therefore, amidst aforesaid facts, the medium-termprojections are not feasible.
• The Finance Ministry emphasized the need for the government to maintain flexibility in fiscal managementto effectively manage exogenous shocks and global uncertainties.
• This flexibility is seen as indispensable for the government to retain the necessary fiscal firepower to address unforeseen contingencies that may arise during periods of economic ambiguity.

Medium-Term Expenditure Framework (MTEF)

• The MTEF statement sets a three-year rolling targetfor expenditure indicators, along with specifications of underpinning assumptions and risks.
  • This statement is presented in Parliament under Section 3 of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003.
• The statement provides anestimate of expenditure for various sectors, including education, health, rural development, energy, subsidies and pension, and so on.
• This statement is presented in the session after the one in which the Budget is presented— usually, that is the monsoon session.
• Expenditure Commitments:
  • Data such as expenditure commitments spread across the various central ministries on salaries and pensions, major programmes, grants-in-aid for creation of capital assets, defence expenditure, interest payment and major subsidies, etc, besides other commitments of the government are considered while formulating this statement.
• Objective:
  • The objective of MTEF is tofacilitate a closer integration between FRBM statements and the Union Budget.

Fiscal Reduction and Management Act (FRBM)

• The FRBM Act is an act of the Parliament which was enacted in 2003 with the aim of ensuring fiscal discipline,transparency and accountability in government spending.
• The act requires the government to ensure that the Fiscal Deficitis reduced over a period of timeand to eliminate revenue deficit, which is the excess of government''s total expenditure over its total revenue.
• It limited the fiscal deficit to 3% of the GDP.

• Provisions:

• Fiscal Deficit Targets: The act requires the government to reduce its fiscal deficit to a specified target over a period of time. The fiscal deficit would be brought down to below 4.5 per cent by 2025-26.
• Elimination of Revenue Deficit:The act requires the government to eliminate its revenue deficit, which is the excess of government''s total expenditure over its total revenue.
• Medium-term Fiscal Strategy:The act requires the government to formulate and implement a medium-term fiscal strategy, which outlines the government''s plans for reducing its fiscal deficit over a period of three years.
• Annual Fiscal Reports:The act requires the government to present an annual fiscal responsibility statement to Parliament, which outlines the government''s progress in achieving its fiscal consolidation targets.

• Statements:

• Macro-Economic Framework Statement:The Macro-Economic Framework Statement providesa detailed outline of the macroeconomic assumptions that form the basis of the budget estimates.
  • It includes key economic indicators and projectionsthat influence revenue and expenditure decisions. These assumptions help in understanding the economic context within which the budget is framed.
• Medium-Term Fiscal Policy Statement:This section outlines the government''s medium-term fiscal policy objectives and the strategies to achieve them over a specific period (usually the next three years).
  • It highlights theintended direction of fiscal policy,the rationale behind fiscal targets, and how these targets align with broader economic goals.
• As India continues to tread through a complex global landscape, the government''s ability to manage its fiscal resources effectively stands as a crucial safeguard against potential economic disruptions.