Fiscal Responsibility and Budget Management (FRBM) Clustering Algorithm

The FRBM Act was enacted by the Indian government to address the issue of fiscal deficit and its negative impact on the Indian economy. It aimed to promote and encourage the proper management of public finances by setting targets for reducing the fiscal deficit and outstanding debt. But most of the states in India do not follow this completely. This affects the economic stability of the states and the country. There are currently no systems in place to measure the extent to which individual states are complying with this. This paper proposes a new algorithm called FRBM Clustering. It is possible to use this algorithm to rank the state governments on the basis of how far different states in India have progressed in implementing the directives under the FRBM act. The state governments can be ranked using the information released by the Reserve Bank of India from time to time and the budget documents of the state governments with the help of this clustering algorithm.