Subject: Economy

The distinction between Capital Budget and Revenue Budget is fundamental to understanding India's fiscal framework, with the Union Budget 2025-26 projecting a total expenditure of ₹50.65 lakh crore.

Key Distinctions between Capital and Revenue Budget

Nature and Purpose

• Capital Budget focuses on creating long-term assets and investments that generate future returns (e.g., infrastructure projects, defense equipment).
• Revenue Budget deals with day-to-day government operations and recurring expenses (e.g., salaries, subsidies, interest payments).

Components of Capital Budget

Receipts

• Market Borrowings: Government securities and bonds.
• Recovery of Loans: Repayment of loans given to states and PSUs.
• Disinvestment Proceeds: Revenue from sale of government stakes in PSUs.

Expenditure

• Capital Outlay: Expenditure on infrastructure (₹11.21 lakh crore in FY26).
• Defense Capital: ₹180,000 crore allocated for defense services.
• Loans to States/UTs: Financial assistance for development projects.

Components of Revenue Budget

Receipts

• Tax Revenue: Direct and indirect taxes (₹25.83 lakh crore, 83% of total revenue).
• Non-Tax Revenue: Dividends, interest, fees (₹5.45 lakh crore, 17% of total revenue).
• Grants-in-Aid: External assistance and contributions.

Expenditure

• Social Sector Spending: Education, health (19% of total expenditure in 2025-26).
• Subsidies: Food, fertilizer, and fuel subsidies.
• Interest Payments: On government borrowings.

The systematic classification of budget into capital and revenue components helps in better fiscal planning and monitoring of government expenditure. The projected 20% increase in social sector spending for 2025-26 reflects the government's commitment to welfare while maintaining focus on capital formation through increased CAPEX allocation.