Which of the following Indian states have adopted the Fiscal Responsibility Legislation (FRL) before the central government?
A. Karnataka
B. Kerala
C. Uttar Pradesh
D. All of the above
Answer:D
Which of the following Indian states have adopted the Fiscal Responsibility Legislation (FRL) before the central government?
A. Karnataka B. Kerala C. Uttar Pradesh D. All of the above
Explanation: One reason why figures on fiscal progress since 2005 give a misleading impression of the impact of the FRL is that not all states adopted FRL in that year. For example, five early adopters – Karnataka, Kerala, Uttar Pradesh, Punjab and Tamil Nadu -- enacted their legislation even before the central government did so in 2003. Many others adopted FRLs in 2005-06, while in a few states legislation did not fall into place until 2010. During this period, many other developments occurred that had a profound impact on fiscal positions. States adopted value added taxes (VAT), the 6th Pay Commission wage awards were granted, the 12th and 13th Finance Commissions made substantive changes to central government transfers to states. This was also a period of high nominal GDP growth, which averaged 15.8 percent between 2005 and 2010. So a second challenge is to distinguish the impact of the FRL in imposing fiscal discipline from the impact of these concurrent policy changes and macro-economic trends.