While the transition to a fullfledged WMA and overdraft mechanism was gradual, non-disruptive and consensual, the successful implementation of this mechanism made it possible to incorporate some of these practices into a law – the Fiscal Responsibility and Budget Management Act (FRBM Act). It is noteworthy that this law also practically prohibited RBI from participating in primary issues of all government securities.
As a result of the concerted efforts to restore fiscal balance through tax reforms, expenditure management, institutional reforms and financial sector reforms in the first half of the 1990s, there was significant reduction in the magnitude of fiscal deficit and the proportion of debt relative to GDP during the period 1991 to 1997.