In the context of Budget, which of the following is NOT an example of capital expenditure of government?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is Option 4: Subsidies.
Explanation:
- In the context of the budget, government expenditure is broadly classified into two main categories: Capital Expenditure and Revenue Expenditure.
- Capital Expenditure: This refers to expenditure that results in either the creation of government assets or a reduction in its liabilities.
- Land Acquisition (Option 1): Creation of an asset.
- Investment in Shares (Option 2): Creation of a financial asset.
- Building Construction (Option 3): Creation of a physical asset.
- Revenue Expenditure: This refers to expenditure that neither creates an asset nor reduces a liability. It is incurred for the day-to-day functioning of the government.
- Subsidies (Option 4): This constitutes revenue expenditure because it is provided solely for welfare activities or consumption purposes; it does not lead to the creation of any permanent asset.
Budget Terminology (Quick Revision):
- Other examples of Revenue Expenditure: Salaries, pensions, interest payments, and maintenance of defense services.
- Other examples of Capital Expenditure: Construction of roads, bridges, and hospitals, as well as loans granted to states.
Important Questions for Upcoming Exams:
Question: What type of expenditure is 'Interest Payment'?
Answer: Revenue Expenditure.
Question: To reduce the 'Fiscal Deficit', in which type of expenditure should the government make cuts?
Answer: Unproductive Revenue Expenditure.
Question: Which Article of the Indian Constitution mentions the 'Annual Financial Statement' (Budget)?
Answer: Article 112.