Budget Basics IV – Plan and Non Plan Expenditure

The government expenditure is divided into two broad heads – Plan and Non Plan.

Plan Expenditure – To make it easy, let me draw company analogy again. If a company spends money on purchase of machinery, buys computer and software to improve, expand and enhance the productivity and efficiency of the company it can be called as Capital Investment. Similarly, in case of Government, the Government spending on developmental activities, rural development, education etc. is classified as Plan Expenditure

Non-Plan Expenditure – If a company spends money towards interest on loan, staff welfare, security, housekeeping etc, it is called as ‘Revenue or Operational Expenditure’. Similarly, in case of Government, the money spent towards interest on borrowed funds, subsidies, Defence, pensions and other establishment costs is classified as ‘Non-Plan Expenditure’

Why is there a very slow development in this country?

Do you agree that it is very difficult to reduce Non-Plan Expenditure? Can government reduce on subsidies? Can Government reduce on payment of Interest on Loans? Can they reduce on salaries? Can they stop giving Dearness Allowance? The answer is a definite ‘No’.

We have limited resources (means Income) but our expenditure is more than our Income and hence we have ‘Deficit budget’. In this scenario, can the income of the government go up? Can they get extra tax when the economy is steady? The answer is a definite ‘No’.

So, if there is no/less chance of Revenue going up and there is no/less chance of reducing Non-plan expenditure; Government have to reduce Plan Expenditure to maintain a moderate deficit! Thus, the plan expenditure will always suffer.

For example, FY 2013-14; the total expenditure was Rs.15,90,434 Crores of which Rs.11,14,902 Crores went to Non-Plan Expenditure (70%) and a mere 30% (Rs.4,75,532 Crores) went to Plan Expenditure.

Now you know why our country is like this. If we are not investing on development, where can we see the development?




Please follow and like us:
0 0 vote
Article Rating
Share This :

About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

Check Also

Karnataka Budget 2023 Analysis Part 2

My friend said the State government puts the money into pits, potholes, drainage, garbage, wells, …

Notify of
1 Comment
Oldest Most Voted
Inline Feedbacks
View all comments
Basics of Budget V – The Budget Documents | Simplified Laws
2023 years ago

[…]                               Plan and Non Plan Expenditure,  […]

Would love your thoughts, please comment.x