CSEET · Economic and Business Environment · Indian Union Budget
Which of the following is correctly classified as capital expenditure of the Central Government?
Grants to States for creating capital assets are counted as capital expenditure in the effective capital expenditure sense, because they lead to asset creation. Interest payments, pensions and fertiliser subsidy are revenue expenditure as they create no assets and only meet current obligations.
- AGrants given to States for creation of capital assetsCorrect
- BPayment of interest on market borrowings
- CPayment of pensions to retired defence personnel
- DSubsidy on fertiliser
Explanation
Under the Budget classification, grants given to States for creating capital assets are treated as revenue expenditure of the grantor in the accounts but counted as effective capital expenditure; the question uses the effective capital expenditure concept, where assets are created. Interest, pensions and subsidy create no asset and are plainly revenue expenditure.
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