Disinvestment by the government is an example of:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Capital receipt
Disinvestment means that the government sells its shares in public sector undertakings (PSUs). The money comes in, and the government’s financial assets fall. A receipt that reduces financial assets is a capital receipt.
Option (1) Capital receipt — Correct. Capital receipts are of two kinds: those that create a liability, such as borrowing, and those that reduce financial assets, as this sale does.
Option (2) Revenue receipt — Incorrect. Revenue receipts are taxes and non-tax revenue, which leave the assets as they are.
Option (3) Capital expenditure — Incorrect. This is money spent to create assets or reduce liabilities. Here the government receives money.
Option (4) Revenue expenditure — Incorrect. This is money spent on the normal functioning of the government, such as interest payments.
NCERT (2026-27): “5.1.2 Classification of Receipts … Capital Receipts: The government also receives money by way of loans or from the sale of its assets. Loans will have to be returned to the agencies from which they have been borrowed. Thus they create liability. Sale of government assets, like sale of shares in Public Sector Undertakings (PSUs) which is referred to as PSU disinvestment, reduce the total amount of financial assets of the government. All those receipts of the government which create liability or reduce financial assets are termed as capital receipts. When government takes fresh loans it will mean that in future these loans will have to be returned and interest will have to be paid on these loans…” |