Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets.

GS 3

Economy

2021

10 Marks

The Union Budget, being the annual financial statement of India, comprises two distinct components - Capital Budget and Revenue Budget, each serving different purposes in fiscal management and economic development.

Distinction between Capital and Revenue Budget

Aspect	Revenue Budget	Capital Budget
Nature	Day-to-day operations and recurring transactions	Asset creation and long-term investments
Duration	Short-term impact (within one fiscal year)	Long-term impact (multi-year benefits)
Purpose	Maintaining existing operations	Wealth and infrastructure creation
Asset Impact	No asset creation/reduction	Creates or reduces government assets
Accounting	Appears in Profit & Loss account	Appears in Balance Sheet

Components of Revenue Budget

Revenue Receipts

Tax Revenue: Direct taxes (Income Tax, Corporate Tax) and indirect taxes (GST, customs duties)
Non-Tax Revenue: Dividends from PSUs, interest receipts, fees, and penalties
Union Excise Duties: On petroleum products and other commodities
Customs Duties: Import and export taxes
According to Budget 2024-25, total receipts (excluding borrowings) estimated at ₹32.07 lakh crore

Revenue Expenditure

Plan Expenditure: Development schemes like MGNREGA, PM-KISAN
Non-Plan Expenditure: Salaries, pensions, administrative costs
Interest Payments: On government borrowings (largest component)
Subsidies: Food, fertilizer, petroleum subsidies
Defence Revenue: Operational expenses of armed forces

Components of Capital Budget

Capital Receipts

Market Borrowings: Government securities and treasury bills
External Assistance: Loans from World Bank, ADB
Recovery of Loans: From states and public enterprises
Disinvestment Proceeds: Sale of government stakes in Air India, BPCL
Small Savings: Provident Fund, NSC collections

Capital Expenditure

Infrastructure Development: Roads (Bharatmala), railways, ports under PM Gati Shakti
Defence Capital: Military equipment, strategic infrastructure
Loans to States: For development projects and disaster relief
Investment in PSUs: Equity participation in public enterprises
Budget 2024-25 allocated ₹11.11 lakh crore for capital expenditure (3.4% of GDP)

This dual budgetary structure ensures balanced fiscal management while targeting 4.9% fiscal deficit in 2024-25, supporting both current operations and future growth through strategic investments.

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