In India’s budgetary framework, expenditure and receipts are classified into Revenue Budget and Capital Budget. These classifications help in understanding the government’s financial management and allocation of resources.
1. Revenue Budget
Definition: The Revenue Budget refers to the portion of the budget that deals with the government’s revenue receipts and revenue expenditure. It focuses on the government’s day-to-day operations and routine expenses.
Components:
a. Revenue Receipts: These are the incomes that the government receives regularly and do not create a liability. They include:
- Tax Revenue: Income from taxes such as income tax, corporate tax, GST, and excise duty.
- Non-Tax Revenue: Income from sources other than taxes, such as fees, fines, and dividends from government enterprises.
b. Revenue Expenditure: These are the expenditures that do not result in the creation of assets. They are used for the government’s routine operational costs and include:
- Salaries and Wages: Payments to government employees.
- Interest Payments: Payments made towards servicing public debt.
- Subsidies: Financial aid provided for essential goods and services like food and fuel.
Characteristics:
- Recurring: Regularly occurring and essential for the government’s day-to-day functioning.
- Non-Asset Creating: Does not lead to the creation of physical or financial assets.
Example:
- Revenue Receipts: If the government collects ₹7 lakh crore in GST and ₹5 lakh crore in income tax during a fiscal year, these amounts fall under revenue receipts.
- Revenue Expenditure: The government might spend ₹4 lakh crore on salaries of its employees, ₹6 lakh crore on interest payments, and ₹3 lakh crore on subsidies.
2. Capital Budget
Definition: The Capital Budget deals with the government’s capital receipts and capital expenditure. It focuses on investments in assets that will provide long-term benefits and create future liabilities.
Components:
a. Capital Receipts: These are funds that the government receives, which create liabilities or reduce assets. They include:
- Borrowings: Loans taken from domestic or international sources.
- Disinvestment: Sale of shares or assets of public sector enterprises.
- Repayment of Loans: Receipts from repayments made by state governments or other entities.
b. Capital Expenditure: These are expenditures that result in the creation of physical or financial assets and provide long-term benefits. They include:
- Infrastructure Development: Investments in roads, bridges, railways, and other infrastructure projects.
- Purchase of Assets: Acquisition of land, machinery, and equipment.
- Investment in Enterprises: Funding for public sector enterprises to expand or modernize.
Characteristics:
- Non-Recurring: Typically involves one-time large investments.
- Asset-Creating: Leads to the creation of physical or financial assets.
Example:
- Capital Receipts: The government may raise ₹3 lakh crore through domestic borrowings and earn ₹1.5 lakh crore from disinvestment in public sector enterprises.
- Capital Expenditure: The government might spend ₹5 lakh crore on infrastructure projects like highway construction and ₹2 lakh crore on purchasing new machinery for public enterprises.
Comparison Table
| Aspect | Revenue Budget | Capital Budget |
| Definition | Deals with routine income and expenditure. | Deals with investments in assets and creation of liabilities. |
| Receipts | Tax and non-tax revenues. | Borrowings, disinvestment, and loan repayments. |
| Expenditure | Routine expenses like salaries, interest payments, subsidies. | Investments in infrastructure, asset purchases, and enterprise funding. |
| Nature | Recurring and operational. | Non-recurring and asset-creating. |
| Example | Revenue receipts: GST of ₹7 lakh crore; Revenue expenditure: Salaries of ₹4 lakh crore. | Capital receipts: Domestic borrowings of ₹3 lakh crore; Capital expenditure: ₹5 lakh crore on highways. |
Conclusion
Understanding the distinction between the Revenue Budget and the Capital Budget is crucial for evaluating government finances and economic policies. The Revenue Budget focuses on the ongoing operational aspects of government finance, while the Capital Budget deals with investments and financial strategies aimed at long-term development and asset creation. Both budgets are integral to managing public resources and ensuring balanced fiscal policies.
