Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. UPSC 2021, 10 Marks

Q2. पूँजी बजट तथा राजस्व बजट के मध्य अन्तर स्पष्ट कीजिए  इन दोनों बजटों के संघटकों को समझाइए  (150 शब्दों में उत्तर दीजिए)
Q2. Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (Answer in 150 words) 10

Answer:

The Union Budget of a year is referred to as the Annual Financial Statement in Article 112 of the Indian Constitution (AFS).

It is a statement of the government’s expected receipts and expenditures for a fiscal year. Both Capital and revenue budget are part of the overall Annual Budget.

The revenue budget consists of items that do not result in a change in the government’s assets or liabilities. The capital budget includes items that cause a change in the government’s assets or liabilities.

The capital budget includes both capital receipts and capital expenditures. Borrowings, loans from a public or foreign government, or borrowings from the central bank made by a country’s government are referred to as capital receipts. Capital expenditure, on the other hand, refers to expenditure on the development of machinery, health facilities, and so on.

The Revenue Budget, on the other hand, refers to the government’s tax and other revenue receipts and the expenditures met from those same revenues.

Components of Revenue and Capital Budget

Revenue Budget

    • The Revenue Budget is made up of Revenue Expenditure and Revenue Receipts.
  • Revenue receipts are receipts that do not have a direct impact on the government’s assets and liabilities. It is made up of money earned by the government through taxation (such as excise duty and income tax) and non-taxation sources (such as dividend income, profits, interest receipts).
  • Revenue expenditure is government spending that has no effect on the government’s assets or liabilities. This includes, for example, salaries, interest payments, pensions, and administrative costs.

Capital Budget

  • The capital budget includes both capital receipts and capital expenditures.
  • Capital receipts are receipts that result in a decrease in the government’s assets or an increase in its liabilities. It is made up of two parts: I the money earned by selling assets (or disinvesting) such as shares of public enterprises, and (ii) the money received by states in the form of borrowings or loan repayments.
  • Capital expenditure is used to either create or reduce liabilities. It consists of I the government’s long-term investments in assets such as roads and hospitals, and (ii) the money given to states in the form of loans or repayment of its borrowings

Leave a Reply