UKPSC Prelims 2024 Q66: When did the Government of Uttarakhand pass the Fiscal

Q: What is the answer to UKPSC Prelims 2024 Q66?

C. Correct — C, In 2005. Uttarakhand's own fiscal rule is the Uttaranchal Fiscal Responsibility and Budget Management Act, 2005 (Uttarakhand Act No. 22 of 2005), passed in October 2005 while the State was still officially named Uttaranchal. So the keyed answer is **In 2005**. The idea to carry away: **the Centre's FRBM Act is a 2003 law, but each State passed its own Act on its own date**. Uttarakhand, like many States, did so in 2005, after the Twelfth Finance Commission made a State fiscal responsibility law the condition for its debt-relief package.

UKPSC Prelims 2024 General Studies Paper-I · Question 66 of 147

Verified against the official question booklet. Answer as per UKPSC's provisional answer key.

Answers from UKPSC's provisional answer key. The Commission publishes a provisional key for UKPSC Prelims 2024 and invites objections before issuing a final key. Every answer shown here is the Commission's own provisional answer (key PDF), not our derivation. If the final key changes an answer, this page is updated to match.

When did the Government of Uttarakhand pass the Fiscal Responsibility and Budget Management Act?

(a)In 2003
(b)In 2007
(c)In 2005
(d)In 2009

Answer

Why

Correct — C, In 2005.

Uttarakhand's own fiscal rule is the Uttaranchal Fiscal Responsibility and Budget Management Act, 2005 (Uttarakhand Act No. 22 of 2005), passed in October 2005 while the State was still officially named Uttaranchal. So the keyed answer is In 2005.

The idea to carry away: the Centre's FRBM Act is a 2003 law, but each State passed its own Act on its own date. Uttarakhand, like many States, did so in 2005, after the Twelfth Finance Commission made a State fiscal responsibility law the condition for its debt-relief package.

Why the others are wrong

(a)
In 2003 — 2003 is the year Parliament passed the Union Fiscal Responsibility and Budget Management Act, 2003, the Central law that set the 3 per cent fiscal-deficit rule and the revenue-deficit elimination target.
The State Assembly passed Uttarakhand's own Act two years later. The State law borrows the Centre's title and its two-deficit design, but not its date.
(b)
In 2007 — 2007 is the year the State's name changed: Uttaranchal became Uttarakhand with effect from 1 January 2007. That is why the original statute is titled the Uttaranchal FRBM Act even though the question calls the State Uttarakhand.
The name changed in 2007; the Act had already been on the statute book since 2005.
(d)
In 2009 — 31 March 2009 is a deadline inside the Act, not the year it was passed. Section 4 gave the State four financial years, 2005-06 to 2008-09, to bring the revenue deficit to zero and the fiscal deficit to 3 per cent of GSDP by 31 March 2009.
A target date marks the end of the window the Act opened in 2005, not its start.

Concept

A Fiscal Responsibility and Budget Management (FRBM) Act is a law that binds a government to numerical fiscal targets: typically a cap on the fiscal deficit as a share of GDP or GSDP, elimination of the revenue deficit, and ceilings on debt and guarantees.

It also imposes disclosure duties, such as a medium-term fiscal policy statement laid with the budget.

India has two tiers of such law. Parliament's FRBM Act, 2003 binds the Union. Each State legislature passes its own Act for its own finances, so the year, the Act number and the exact targets differ from State to State.

The Twelfth Finance Commission (2005-10) recommended a Debt Consolidation and Relief Facility for States, available on condition that a State enacted its own fiscal responsibility law. That condition is why a cluster of State Acts, Uttarakhand's among them, carries the year 2005.

For Uttarakhand the statute is Act No. 22 of 2005. The Comptroller and Auditor General's State Finances reports measure the State's deficits and debt against its targets, and record that it was partially modified in March 2011.

Key facts

The Uttaranchal Fiscal Responsibility and Budget Management Act, 2005 is Uttarakhand Act No. 22 of 2005, enacted in October 2005.
Section 4 of the Act required the revenue deficit to reach zero and the fiscal deficit to fall to 3 per cent of GSDP by 31 March 2009.
The same section capped the State's total liabilities at 25 per cent of GSDP within ten years, that is by 31 March 2015.
The Act permits a temporary breach of its targets on grounds of unforeseen demands on internal security or a natural calamity.
The Act requires a Medium Term Fiscal Policy statement to be laid with the annual budget, carrying rolling targets for the prescribed fiscal indicators.
The Union's FRBM Act was passed by Parliament in 2003 and brought into force on 5 July 2004.
The State was renamed from Uttaranchal to Uttarakhand with effect from 1 January 2007, which is why the 2005 Act bears the older name.
The CAG's State Finances audit report on Uttarakhand describes the statute as 'FRBM Act, 2005 (partially modified in March 2011)'.
Karnataka was the first State to legislate a fiscal responsibility law, the Karnataka Fiscal Responsibility Act, 2002.
Rajasthan's counterpart is the Rajasthan Fiscal Responsibility and Budget Management Act, 2005, Act No. 7 of 2005, assented to on 2 May 2005.

Union FRBM Act vs Uttarakhand FRBM Act

Union: passed by Parliament in 2003→Uttarakhand: passed by the State Assembly in 2005

In force from 5 July 2004→Act No. 22 of 2005, October 2005

Fiscal deficit: 3% of GDP→Fiscal deficit: 3% of GSDP by 31 March 2009

Revenue deficit: elimination targeted→Revenue deficit: zero by 31 March 2009

Debt: 40% of GDP for the Centre (2018 amendment)→Total liabilities: 25% of GSDP by 31 March 2015

Same title and same design, but a different legislature and a different year. The State's 2005 is the answer; the Centre's 2003 is the decoy.

Study next

Twelfth Finance Commission's Debt Consolidation and Relief Facility and the State FRBM Acts of 2005Union FRBM Act, 2003: original targets, the 2018 amendment and the escape clauseN.K. Singh FRBM Review Committee (2017) and the 60 per cent general-government debt targetUttarakhand's fiscal deficit, revenue balance and debt-to-GSDP trends in the CAG State Finances reportsFifteenth Finance Commission's fiscal-deficit ceilings and additional borrowing space for States

Common traps

Answering with the Centre's year: the Union FRBM Act is a 2003 law, but the stem asks when the Government of Uttarakhand passed its own Act, which is 2005.
Reading 2009 off the Act's target date: 31 March 2009 is the deadline for the deficit targets inside the Act, not the year of enactment.
Assuming the Act must post-date the 2007 renaming because the stem says 'Uttarakhand': the statute was passed as the Uttaranchal FRBM Act, 2005 and kept its year.
Treating one State's year as another's: Rajasthan's Act is also from 2005, but Karnataka's Fiscal Responsibility Act dates from 2002, so each State's year has to be learnt separately.

The question can come as a bare date, as here, with the Centre's 2003 and the Act's own 2009 target year sitting among the options. It can also come as a numbers question on the targets: 3 per cent of GSDP, a zero revenue deficit, or 25 per cent debt-to-GSDP.

A third shape pairs the Act with its trigger, asking which Finance Commission linked debt relief to State fiscal responsibility legislation. In each shape the discriminating fact is whether the law in question is the Centre's or the State's.

Related PYQs

RPSC_2023_PRE_Prelims2023_Q562023

Same question shape applied to a different State: RPSC asked the year Rajasthan enacted its FRBM Act. Rajasthan's statute is also from 2005 (Act No. 7 of 2005, assented to on 2 May 2005), so the two share a year but not a law; the Uttarakhand answer cannot be copied across, each State's year is learnt on its own.

UPSC_2010_GS1_Q262010

Asks what the Union FRBM Act, 2003 stipulated: revenue-deficit elimination by 2007-08, no borrowing from the RBI except in stated circumstances, and guarantee caps as a share of GDP. Same family of law, but the Centre's Act and targets rather than the State's; the 2003 in that stem is the decoy sitting in option (a) here.

UPSC_2006_GS1_Q242006

Tests what an FRBM Act concerns, with the answer that it covers both the fiscal and the revenue deficit. Concept-level rather than date-level, and framed on the Union Act; the Uttarakhand Act follows the same two-deficit design in its Section 4.

UPSC_2018_GS1_Q92018

Tests the FRBM Review Committee's recommendation of a 60 per cent general-government debt-to-GDP ratio, split 40 per cent Centre and 20 per cent States. Same policy strand a decade on, but about the Union framework and a combined debt ratio, not about when any State passed its Act.

UKPSC_2023_MAINS_UKPCSMainsEco2023_Q222023

The Commission's 2023 Mains economics paper asked what the FRBM Act is and whether the Government of India has followed it. Same statute family from the same examiner, but framed on the Union and its compliance, not on the State's own 2005 enactment.

HPSC_2021_PRE_GSII_Q922021

Reads Haryana's 2022-23 budget figures against FRBM limits: revenue deficit within the prescribed limit, fiscal deficit as a share of GSDP, debt-to-GSDP. Shows the other way a State FRBM Act is examined, through compliance numbers, whereas this question asks for the enactment year.

Practice

practice — not a real PYQ
The Uttarakhand (Uttaranchal) Fiscal Responsibility and Budget Management Act, 2005 required the State's fiscal deficit to be brought down to what level, and by which date?
- (a)3 per cent of GSDP by 31 March 2009
- (b)3 per cent of GSDP by 31 March 2015
- (c)Zero by 31 March 2009
- (d)25 per cent of GSDP by 31 March 2015
Answera — Section 4 set the fiscal-deficit target at 3 per cent of GSDP within four financial years ending 31 March 2009.
(b) borrows the ten-year deadline that belongs to the debt ceiling; (c) is the revenue-deficit target, which was to reach zero, not the fiscal-deficit one; (d) is the cap on total liabilities, 25 per cent of GSDP by 31 March 2015, which is a debt limit rather than a deficit target.
practice — not a real PYQ
Which Finance Commission recommended a Debt Consolidation and Relief Facility for States on the condition that a State enacts its own fiscal responsibility legislation, prompting the wave of State FRBM Acts that includes Uttarakhand's Act of 2005?
- (a)Eleventh Finance Commission
- (b)Twelfth Finance Commission
- (c)Thirteenth Finance Commission
- (d)Fourteenth Finance Commission
Answerb — The Twelfth Finance Commission (2005-10) made enactment of a State fiscal responsibility law the condition for its Debt Consolidation and Relief Facility, which is why Uttarakhand's Act and many others carry the year 2005.
(a) The Eleventh Commission's award period ended in 2005, before this facility operated. (c) and (d) The Thirteenth and Fourteenth Commissions came later and worked with State Acts that already existed, asking for revised fiscal roadmaps and setting borrowing limits rather than requiring enactment.
practice — not a real PYQ
Consider the following statements about fiscal responsibility legislation in India: 1. The Union Fiscal Responsibility and Budget Management Act was passed by Parliament in 2003. 2. Uttarakhand's Fiscal Responsibility and Budget Management Act was passed in the same year as the Union Act. 3. Uttarakhand's Act was passed while the State was still officially named Uttaranchal. Which of the statements given above are correct?
- (a)1 and 2 only
- (b)1 and 3 only
- (c)2 and 3 only
- (d)1, 2 and 3
Answerb — Statement 1 is right: Parliament passed the Union Act in 2003. Statement 3 is right: the State Act of October 2005 is titled the Uttaranchal FRBM Act because the renaming to Uttarakhand took effect on 1 January 2007.
Statement 2 fails because the State passed its Act in 2005, two years after the Centre. Options (a), (c) and (d) each include statement 2, so each contains a false statement.