Debt Sustainability Indicators — Policy Reforms

Entry	Year	Description	Impact
FRBM Act Amendment (2012)	2012	The FRBM Act was amended to replace the earlier target of eliminating revenue deficit with a target for effective revenue deficit. It also introduced a new glide path for fiscal consolidation, extending the deadline for achieving the fiscal deficit target. This amendment recognized the need for flexibility in fiscal policy, especially in the aftermath of global economic shocks, and aimed to distinguish between revenue expenditure and capital expenditure for better quality of fiscal adjustment.	Provided greater flexibility in fiscal management, allowing for higher revenue deficits if they were used for capital expenditure. This acknowledged that not all revenue deficits are equally detrimental and that investment in productive assets is crucial for long-term growth and, by extension, debt sustainability. However, it also led to some concerns about potential fiscal slippages.
FRBM Act Review (NK Singh Committee Report, 2017)	2017	Though not an amendment itself, the recommendations of the NK Singh Committee significantly influenced subsequent fiscal policy. It proposed a new debt-to-GDP target of 60% for the general government by FY2022-23 (40% for Centre, 20% for States) and suggested an 'escape clause' for extraordinary circumstances. It also recommended the establishment of a Fiscal Council.	While the specific debt targets were not legislated, the report provided a new intellectual framework for India's fiscal policy, emphasizing a medium-term debt anchor and greater transparency. It highlighted the need for a consolidated debt target for both Centre and States, influencing the fiscal roadmap and discussions around debt sustainability.