Which of the following is/are included in the capital budget of the Government of India? 1. Expenditure on acquisition of assets like roads, buildings, machinery, etc. 2. Loans received from foreign governments. 3. Loans and advances granted to the States and Union Territories. Select the correct answer using the code given below.

QUESTION

Medium

Economy

Prelims 2016

Which of the following is/are included in the capital budget of the Government of India?

Expenditure on acquisition of assets like roads, buildings, machinery, etc.
Loans received from foreign governments.
Loans and advances granted to the States and Union Territories.

Select the correct answer using the code given below.

Select an option to attempt

Explanation

Statement 1 is correct: This is a classic example of Capital Expenditure. This type of spending creates physical assets for the country and is long-term in nature. Therefore, it is included in the capital budget.

Statement 2 is correct: This is a Capital Receipt. When the government receives a loan, it creates a liability (it has to be repaid in the future). Since it affects the government's liabilities, it is part of the capital budget.

Statement 3 is correct: This is also a form of Capital Expenditure. When the central government grants a loan, it creates a financial asset for itself (the loan is an asset that will earn interest and be repaid). As this spending creates an asset, it is included in the capital budget.

Since all three items are either capital expenditures or capital receipts, they are all part of the Capital Budget of the Government of India.

Trusted by 2L aspirants