Plan and Non-Plan Expenditures
Government of India has now scrapped the plan and non-plan expenditures in budget exercise and their place has been now taken by capital and revenue spending classifications. The classification of plan and non-plan was a major exercise in India during planning era. Under this, all expenditures which were done in the name of planning were called plan expenditures while all other expenditures were placed under non-plan expenditures. Further, generally (not always), the plan expenditure produced some tangible assets related to economic development. This was the reason that plan expenditures were also called “development expenditures”.
This classification is not relevant now still for your examinations, kindly note that important non-plan revenue expenditures included the following:
- Interest payments on the loans taken by Government of India
- Expenditure incurred on Defence Services (except Defence Equipment which is a capital expenditure)
- Subsidies
- Grants to the states and UTs, including those from calamity fund
- Pensions, Social services such as healthcare, education, social security etc.
- Police
- Economic services by the government such as Agriculture, Industry, Power, Science & Technology
- Grants to foreign Governments
Non-Plan Capital Expenditure included the following:
- Defence Equipments and modernization
- Loans to Public sector companies
- Loans to states and union territories
One of the most important headings under the non plan revenue expenditures is “Interest payments on the loans taken by Government of India”. The plan components were related to items dealing with long-term socio-economic goals as determined by the ongoing plan process. They often relate to specific schemes and projects. Furthermore, they are usually routed through central ministries to state governments for achieving certain desired objectives. These funds are generally in addition to the assignment of central taxes as determined by the Finance Commissions. In some cases, the state governments also contribute their own funds to the schemes.