Which of the following statements about capital expenditure is NOT correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Non-plan capital expenditure relates to the central plan and central assistance for state and union territory plans.
Capital expenditure is split into plan and non-plan. It is the plan part that relates to central plans and assistance for state plans.
Option (1) It results in the creation of physical or financial assets or a reduction in financial liabilities. — True. This is the definition of capital expenditure.
Option (2) It includes loans and advances by the central government to state and union territory governments, PSUs and other parties. — True. Such loans create a financial asset.
Option (3) It is also categorised as plan and non-plan in the budget documents. — True. The budget splits it as it splits revenue expenditure.
Option (4) Non-plan capital expenditure relates to the central plan and central assistance for state and union territory plans. — False. This describes plan capital expenditure. Non-plan capital expenditure covers general, social and economic services.
NCERT (2026-27): “Capital Expenditure There are expenditures of the government which result in creation of physical or financial assets or reduction in financial liabilities. This includes expenditure on the acquisition of land, building, machinery, equipment, investment in shares, and loans and advances by the central government to state and union territory governments, PSUs and other parties. Capital expenditure is also categorised as plan and non-plan in the budget documents. Plan capital expenditure, like its revenue counterpart, relates to central plan and central assistance for state and union territory plans. Non-plan capital expenditure covers various general, social and economic services provided by the government. …” |