The Union Budget of India, presented annually by the Finance Minister, outlines the government's financial plan for the fiscal year (April 1 to March 31). It is divided into Revenue Budget and Capital Budget, covering receipts and expenditure. This chapter provides a detailed breakdown of Revenue Receipts, Capital Receipts, Revenue Expenditure, and Capital Expenditure, along with key data and concepts for UPSC Prelims preparation.
Revenue Receipts
Revenue Receipts are funds that do not create liabilities or reduce assets. They finance the government's day-to-day operations and are non-redeemable.
Tax Revenue: Includes direct taxes (e.g., Income Tax, Corporate Tax) and indirect taxes (e.g., GST, Customs Duties, Excise Duties). In 2024-25, tax revenue was estimated at ₹26.07 lakh crore, with GST being the largest contributor.
Non-Tax Revenue: Includes interest on loans, dividends from PSUs (e.g., RBI, LIC), fees for services, and grants-in-aid. Non-tax revenue for 2024-25 was projected at ₹5.41 lakh crore.
Example: In the 2024-25 Union Budget, GST collections were estimated at ₹10.61 lakh crore, reflecting its growing importance in revenue receipts.
Capital Receipts
Capital Receipts either create liabilities (e.g., borrowings) or reduce assets (e.g., disinvestment). They fund long-term investments or debt repayment.
Borrowings: Market loans, treasury bills, and external loans (e.g., from World Bank). In 2024-25, net borrowings were estimated at ₹11.63 lakh crore.
Disinvestment: Sale of government stakes in PSUs. The 2024-25 Budget targeted ₹50,000 crore from disinvestment.
Recovery of Loans: Repayments by states or PSUs, e.g., loans to state governments for infrastructure.
Example: The disinvestment of BPCL and other PSUs in recent budgets has been a key source of capital receipts.
Revenue Expenditure
Revenue Expenditure covers operational and maintenance expenses that do not create assets or reduce liabilities. It forms the bulk of government spending.
Salaries and Pensions: Payments to government employees and pensioners. In 2024-25, this accounted for ~₹4.8 lakh crore.
Subsidies: Food, fertilizer, and fuel subsidies. The 2024-25 Budget allocated ₹2.05 lakh crore for food subsidies.
Interest Payments: On domestic and external debt, estimated at ₹10.79 lakh crore in 2024-25.
Example: The PM-KISAN scheme, providing ₹6,000 annually to farmers, is a significant revenue expenditure.
Capital Expenditure
Capital Expenditure leads to asset creation or liability reduction, driving economic growth through infrastructure and development projects.
Infrastructure: Investments in roads, railways, and ports (e.g., Bharatmala, Sagarmala). The 2024-25 Budget allocated ₹11.11 lakh crore for capital expenditure.
Loan Repayments: Repayment of principal on borrowings, reducing fiscal liabilities.
Grants for Asset Creation: Funds to states for projects like smart cities or rural infrastructure.
Example: The ₹2.55 lakh crore allocation for Indian Railways in 2024-25 supports projects like Vande Bharat trains and station redevelopment.
Key Budget Concepts for Prelims
Understanding related terms is crucial for UPSC Prelims. Below are definitions and data points often asked in exams.
Fiscal Deficit: The difference between total expenditure and total receipts (excluding borrowings). For 2024-25, it was targeted at 4.9% of GDP.
Revenue Deficit: Excess of revenue expenditure over revenue receipts. In 2024-25, it was estimated at 2.0% of GDP.
Primary Deficit: Fiscal deficit minus interest payments. For 2024-25, it was projected at 1.8% of GDP.
Budget Deficit: Total expenditure minus total receipts, including borrowings. Rarely used in modern budgeting.
Key Points for Prelims
Article 112: The Union Budget is presented as the Annual Financial Statement.
Finance Minister presents the Budget on February 1 (since 2017).
2024-25 Budget: Capital expenditure increased by 11.1% over 2023-24.
GST and Income Tax are the largest contributors to tax revenue.
Q1: What is the difference between fiscal deficit and revenue deficit?
Ans: Fiscal deficit is the total borrowing requirement, while revenue deficit is the excess of revenue expenditure over revenue receipts. Fiscal deficit includes both revenue and capital components, whereas revenue deficit is limited to the revenue budget.
Q2: Why is capital expenditure important for economic growth?
Ans: Capital expenditure creates assets like infrastructure, which boosts productivity, employment, and long-term GDP growth. For example, projects like Bharatmala enhance connectivity and trade.
Q3: What is the significance of the FRBM Act?
Ans: The FRBM Act, 2003, mandates fiscal discipline, targeting a fiscal deficit of 3% of GDP and eliminating revenue deficit. It ensures sustainable public finances.