- The Government of India had announced in 2016, that the classification of plan expenditure and non-plan expenditure will be abolished.
- The plan and non-plan classification was removed from 2017-18.
- Henceforth the expenditures of the Government will be reclassified as Capital and Revenue spending.
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Plan and Non-Plan Expenditure – Reasons for Switching to Capital and Revenue Spending Classification
- The primary reason behind the Government’s decision in 2016 to switch the classification of Government expenditures was the recommendation given by the C Rangarajan Committee in 2011 to remove the distinction between Plan and Non-Plan expenditure.
- The plan to drop the old classification of Government expenditure was taken after the Planning Commission was dismantled.
- Earlier, the decision on Plan expenditure was taken after Government discussions with the Planning Commission.
- In the earlier system of expenditure classification, more importance was laid on planned expenditure.
- In the newly adopted system of classification, emphasis will be on the expenditures of the Government.
- The new classification of Capital and Revenue Spendings will create a clear and effective link between the Government’s earnings, spending, and outcomes.
Capital and Revenue Expenditure
The distinction between Capital and Revenue Expenditure is given below.
- Loans to States & Union Territories
- Loans to Public Enterprises
- Loans to Foreign Governments
- Acquisition of valuables
Any expenditure of the Government that does not lead the creation of assets or liabilities will be clubbed under Revenue Expenditures. Some of the examples of Revenue Expenditure are given below.
- Wages to Government employees
- Interest Payments
Candidates can refer to the Previous Year’s Economics Questions in UPSC Mains GS 3, from the linked article.
Plan and Non-Plan Expenditure Replaced with New Classification – UPSC Notes:- Download PDF Here
The above details would help candidates prepare for UPSC 2020.