G.2. Capital Budget

UPSC Full Course [English]

About Lesson

[Image: Process of Capital Budget]

The Capital Budget is an account of the assets as well as liabilities of the Central Government. This shows the capital requirements (for creating long term durable infrastructure) of the government and the pattern of their financing.

The Capital Budget, in turn, has 2 sub-components:

Capital Receipts

They comprise the funds received by the government that are not part of the regular income sources. All those receipts of the government which create liability or reduce financial assets are termed as capital receipts.

Capital Receipts are of two types:

Debt Creating – These include fresh loans and other liabilities raised by the government.
Non-Debt Creating– These include amounts received by the government from the disposal of its assets and recovery of loans.

Capital Expenditure

It comprises expenses incurred by the government to create long-term assets and investments that give profits or dividends in the future.

Some of the major components of Capital Expenditure include:

Expenditure on developing infrastructure like roads, schools, hospitals, etc.
Investments in shares of the government companies and corporations.
Loans and advances made by the Central government to States and Union Territories or foreign agencies.
Repayments of loans and other liabilities (only repayment of the principle amount of the loan forms capital expenditure. Interest payments on loans is a part of the revenue expenditure.)

[Title: Capital Receipt]

G.2. Capital Budget

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