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CSEET · Economic and Business Environment · Indian Union Budget

Which of the following is a feature that distinguishes capital expenditure from revenue expenditure in the Union Budget?

Capital expenditure creates assets or reduces liabilities of the government, such as building infrastructure or repaying loans. Interest payments, salaries, pensions and subsidies are revenue expenditure because they only meet the government's routine running costs and leave no asset behind.

  1. AIt is incurred on payment of interest on past borrowings
  2. BIt results in creation of assets or reduction of liabilities of the governmentCorrect
  3. CIt is incurred on salaries and pensions of government employees
  4. DIt is incurred on subsidies given to consumers

Explanation

Capital expenditure builds assets (roads, defence equipment, loans to states) or reduces liabilities (repayment of borrowings). Interest, salaries, pensions and subsidies are consumption-type spending that creates no asset, so they are revenue expenditure.

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