Fiscal Policy & Revenue (Part – II)

Earlier (before Union Budget 2017-18) in the budget estimates, there was plan and non-plan classification of the Government's expenditure. Non-Plan expenditure of the Government consisted of subsidies, interest payments, defence services expenditure, maintenance expenditure for the infrastructure created in the previous plans, salaries and pensions payments, statutory transfers to the States and U.T. Governments etc. While all expenditure done in the name of planning (i.e. Five Year Plans) were called Plan Expenditure. Budget 2017-18 brought 3 major reforms. First, presentation of Budget advanced to 1" February to enable the Ministries to operationalise all activities from the commencement of the financial year. Second, merger of Railway Budget with the General Budget and third, removal of Plan and Non-Plan classification of expenditure.

Before 2017-18 Union Budget estimates of expenditure were generally classified on two different bases: (1) Division in Before 2017-18 Union Budget estimates of expenditure were Plan and Non-Plan expenditure, and (2) Division in Revenue and Capital expenditure. Revenue expenditure has the largest amount of expenditure in the Union Budget of India. The Plan and Non-Plan expenditure classification was removed from Budget 2017-18.

Union Budget 2017-18 (Presented before the Parliament on 1 February, 2017) contained 3 major reforms:

(i) Advancement of date of presentation of Union Budget almost by a month (from February-end to 1 February);

(ii) Merger of Railway Budget with the General Budget, i.e. bringing Railway finances into the mainstream budgeting.

(iii) Elimination of the classification of expenditure into "Plan" and "Non-Plan

Increase in the number of centrally sponsored schemes did not take place in the Union Budget 2017-18.

Union Budget 2017-18 (Presented before the Parliament on 1 February, 2017) contained 3 major reforms:

(i) Advancement of date of presentation of Union Budget almost by a month (from February-end to 1 February);

(ii) Merger of Railway Budget with the General Budget, i.e. bringing Railway finances into the mainstream budgeting.

(iii) Elimination of the classification of expenditure into "Plan" and "Non-Plan

Increase in the number of centrally sponsored schemes did not take place in the Union Budget 2017-18.

The Government can reduce fiscal deficit by decreasing revenue expenditure and increasing revenue receipts. Unnecessary revenue expenditure bloats the fiscal deficit, and since it forms the majority of Government spending, its reduction has a very large effect on the fiscal deficit. Initiating new welfare schemes will increase revenue expenditure while reducing import duty will reduce revenue receipts. Hence, both will cause the increase in deficit, Subsidies are a major component of revenue expenditure, and its rationalization will reduce this and cut down fiscal deficit. Hence, option (c) is the correct answer. Expanding industries by budgetary support will not add anything in the short-run to the tax revenues of the Government, and thus will increase the deficit.

Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.

Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.

Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.

Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.

Revenue expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries and allowances, pensions, subsidies, interest and administrative expenses fall in this category as revenue expenditure examples. Interest payment is the most important and largest item of revenue expenditure and total expenditure of the Union Government. In Interim Union Budget 2024-25, revenue expenditure is expected to increase by 3.23%, over the revised estimates of 2023-24 to Rs. 3654657 crore. Expenditure on interest payments in 2024-25 is expected to be Rs. 1190440 crore, which is 32.57% of the government's revenue expenditure, 39.66% of the government's revenue receipts and 24.98% of the government's total expenditure (excluding of the States' share of taxes and duties). Budget estimate of interest payments in 2024-25 is 12.79% higher than the revised estimate of 2023-24.