Q. With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure?

  1. Defence expenditure
  2. Interest payments
  3. Salaries and pensions
  4. Subsidies

Select the correct answer using the code given below.

  • 1 only
  • 2 and 3 only
  • 1, 2, 3 and 4
  • None

Answer: (c) 1, 2, 3 and 4

Plan Expenditure: Asset Creation for Development
  • Plan Expenditure was earmarked for activities focused on creating assets, including physical, human, and social capital. This category aimed at fostering development and enhancing the country’s infrastructure.
  • Asset Creation Examples:
    • Projects such as building dams, roads, power plants, and investments in social and human capital were categorized as Plan Expenditure. The goal was to contribute to long-term development objectives.
  • Perverse Effects:
    • Despite the positive intent, the classification led to unintended consequences. Asset maintenance, crucial for the sustainability of infrastructure, was designated as Non-plan Expenditure. This led to neglect of maintenance activities, creating a false perception of skewed spending priorities.
Non-plan Expenditure: Maintenance and Upkeep
  • Non-plan Expenditure covered maintenance activities and the upkeep of existing assets. This included routine expenditures to ensure the functionality and longevity of previously created infrastructure.
  • A major part of the Non-Plan Expenditure is obligatory in nature, like interest payments, pensions, statutory transfers to States and Union Territories governments.
  • Non-Plan Expenditure constitutes the biggest proportion of the of the government’s total expenditure. The biggest items of Non-Plan Expenditure are interest payments and debt servicing, defence expenditure and subsidies. For defence services, both revenue and capital expenditure are incurred.
  • Maintenance Neglect:
    • The negative perception associated with Non-plan Expenditure resulted in a neglect of maintenance activities. The public viewed higher spending on maintenance as a diversion from capital formation, even though it was essential for the sustainability of assets.
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