• Government Expenditure is divided into Plan and Non-Plan expenditure. Non-plan does not mean that the expenditure is unplanned.
  • ‘Plan’ in this context indicates what is covered in the Five-Year Plan. Non-Plan expenditure covers defence expenditure, interest payments and subsidies and grants to states. It can be divided into revenue account and capital account. Revenue account is, simply, expenditure that gets consumed and Capital Account is one that creates some productive assets.
  • Defence personnel salaries, interest payments and subsidies would come under Non-Plan revenue expenditure
  • Plan expenditure can again be split into revenue and capital components. Needless to say, a majority of the money is spent on revenue expenditure, i.e. salaries, overheads and other stuff, which does very little for the development of the economy.
  • The central government funds its expenditure mainly through taxes – income tax, corporate tax, excise and custom duties.
  • Its non-tax revenue come from interest received and surpluses of PSUs, financial institutions and other departmental undertakings like the railways, Post, etc.
  • Recoveries of loans from states (and others) and the government borrowings make up the capital receipts of the government.
  • In calculating the fiscal deficit, government borrowings are not included on the revenue side of the budget. It is therefore the cash by which the government is short to cover the proposed expenditure.
  • The target for fiscal deficit is set as a percentage of GDP. Also, most of the revenue numbers depend on the GDP growth. This time it is expected to be 5.1% of GDP possibly seeing GDP at Rs.101.59trillion.

I would appreciate your input if I am wrong somewhere.

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