Escape Revolution

What are expenditure and revenue budgets?


The second Budget of the second term of Narendra Modi government will be presented on February 1. The Budget will be presented in the backdrop of slowing economic growth. To revive the sagging demand without allowing fiscal deficit to go off-track would be a tough nut to crack when the growth is continually decelerating. Before setting eyes on the Budget for this year, let’s take note of the two most important components -Expenditure Budget and Revenue Budget.

  1. What is an Expenditure Budget?
    Expenditure Budget is the allocation of funds for disbursement to various ministries, departments and sectors. The Union Budget highlights the respective grants as per the data provided by the ministries and departments . Expenditure Budget is further branched into two categories: Revenue & Capital.
  2. What is Revenue Expenditure?
    Revenue Expenditure does not create any asset or reduce any liability. The allocations under Revenue Expenditure include payment of salaries, pension, interests, expenditure on administration, defence, health, and other services in the country. It is recurring in nature.
  3. What is Capital Expenditure?
    It is on the other hand responsible for asset creation and liabilities reduction. It adds to the capital stock of the economy and bolster the productivity through long-term investments and capital gains. It includes spending on construction of highways, metro rail network, bridges etc. It also includes the loans given to Union Territories and states, and repayment of borrowings. It is non-recurring in nature.
  4. What is Revenue Budget
    Revenue Budget consists of the revenue receipts of the government (tax revenues and other revenues) and the expenditure met from these revenues. Revenue receipts are divided into tax and non-tax revenue. Tax revenue is the income that is gained by governments through taxation. Taxes such as income tax, corporate tax, custom duties, excise and other duties levied by the government. Other revenues are receipts of the government mainly consisting of interest and dividend on investments made by the government, and fees and receipts for other services rendered by the government.
  5. What is revenue deficit?
    When the difference between revenue receipts and revenue expenditure is negative, we have revenue deficit. It means that the government spends more than it earns.