In India’s budgetary system, receipts and expenditures are categorized into revenue and capital categories, each with distinct characteristics and implications.
1. Revenue Receipts
Definition: Revenue receipts are the income collected by the government from various sources that do not result in any liability for the government. They are typically recurring in nature and used for the day-to-day operations of the government.
Characteristics:
- Non-Repayable: Revenue receipts do not create any future liabilities for the government.
- Recurring: They are a regular part of government income, collected annually.
Components:
- Tax Revenue: Income generated from taxes imposed by the government.
- Direct Taxes: Taxes directly levied on individuals or entities, such as Income Tax and Corporate Tax.
- Indirect Taxes: Taxes levied on goods and services, such as Goods and Services Tax (GST) and Excise Duty.
- Non-Tax Revenue: Income from sources other than taxes.
- Fees and Fines: Income from various fees, such as license fees and penalties.
- Dividends and Profits: Earnings from government-owned enterprises.
Example:
- Income Tax Revenue: The government collects ₹5 lakh crore from income tax in a fiscal year.
- GST Revenue: The government receives ₹7 lakh crore from Goods and Services Tax.
2. Revenue Expenditure
Definition: Revenue expenditure refers to the spending by the government on goods and services that do not result in the creation of assets. It is used to meet the day-to-day expenses of running the government.
Characteristics:
- Recurring: Regularly incurred expenditure.
- Non-Capital: Does not result in the creation of fixed assets.
Components:
- Salaries and Wages: Payments to government employees and officials.
- Subsidies: Financial assistance provided to individuals or businesses, such as subsidies on food, fuel, or agriculture.
- Interest Payments: Payments made towards servicing public debt.
Example:
- Salaries and Wages: The government spends ₹4 lakh crore on salaries and wages of government employees.
- Subsidies: The government allocates ₹2 lakh crore for subsidies on fuel and food.
3. Capital Receipts
Definition: Capital receipts are funds received by the government that create a liability or reduce an asset. These are usually non-recurring and often involve borrowing or asset sales.
Characteristics:
- Liability-Creating: They either result in a future liability or represent the reduction of assets.
- Non-Recurring: Generally collected infrequently or in large amounts.
Components:
- Borrowings: Funds raised through loans from domestic or international sources.
- Domestic Borrowings: Loans from banks or financial institutions within the country.
- External Borrowings: Loans from foreign governments or international organizations.
- Disinvestment: Sale of government-owned shares or assets.
- Privatization: Selling stakes in public sector enterprises to private entities.
- Repayment of Loans: Receipts from repayments made by state governments or other entities.
Example:
- Domestic Borrowings: The government borrows ₹3 lakh crore from banks and financial institutions.
- Disinvestment: The government earns ₹1.5 lakh crore from selling shares in public sector enterprises.
4. Capital Expenditure
Definition: Capital expenditure refers to the spending by the government on acquiring or creating fixed assets that will provide benefits over a long period. This includes investments in infrastructure and development projects.
Characteristics:
- Asset-Creating: Results in the creation of physical or financial assets.
- Non-Recurring: Often involves one-time large investments.
Components:
- Infrastructure Development: Investments in building roads, bridges, schools, and hospitals.
- Purchase of Assets: Acquisition of land, machinery, and equipment.
- Investment in Public Sector Enterprises: Funding for expansion or modernization of government-owned enterprises.
Example:
- Infrastructure Development: The government allocates ₹5 lakh crore for constructing highways, railways, and airports.
- Purchase of Assets: The government spends ₹2 lakh crore on acquiring new machinery and equipment for public sector industries.
Summary Table
| Component | Description | Example |
| Revenue Receipts | Income that does not create liabilities; used for day-to-day operations. | Income tax revenue of ₹5 lakh crore, GST revenue of ₹7 lakh crore. |
| Revenue Expenditure | Spending on non-capital items; recurring expenses. | Salaries of ₹4 lakh crore, subsidies of ₹2 lakh crore. |
| Capital Receipts | Funds creating liabilities or reducing assets; usually non-recurring. | Domestic borrowings of ₹3 lakh crore, disinvestment of ₹1.5 lakh crore. |
| Capital Expenditure | Spending on acquiring or creating assets; long-term investments. | Infrastructure development of ₹5 lakh crore, purchase of machinery worth ₹2 lakh crore. |
Conclusion
Understanding the distinctions between revenue and capital components is crucial for grasping the financial health and priorities of the government. Revenue receipts and expenditures relate to the ongoing operational aspects of government finance, while capital receipts and expenditures focus on long-term investments and financing. Both categories play a significant role in shaping the fiscal policies and economic development of the country.
