The Chief Minister of Kerala has urged the Centre to provide Kerala with flexibility under the Fiscal Responsibility and Budget Management (FRBM) Act.
It is to ensure that the State’s finances are not adversely impacted in the rest of the financial year starting on April 1.
To help fund the emergency relief package, Kerala proposes to borrow as much as Rs 12,500 crore from the market in April itself.
The law does contain what is commonly referred to as an ‘escape clause’.
About FRBM
The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, establish financial discipline to reduce fiscal deficit.
The Act’s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India.
Under the Act, the Centre can exceed the annual fiscal deficit target citing grounds.
The reasons include national security, war, national calamity, collapse of agriculture, structural reforms and decline in real output growth of a quarter by at least three percentage points below the average of the previous four quarters.