Which of the following are sources of revenue expenditure by the Government ?

(A) Repayment of loan

(B) Expenditure on Defence services

(C) Central assistance for states

(D) Interest payments

(E) Lending to commercial banks

Choose the correct answer from the options given below :

(B), (C) and (D) Only

The correct answer is option (3) : (B), (C) and (D) Only

Let's discuss the reason for categorizing each option as a source of revenue expenditure by the Government :

(B) Expenditure on Defence services : Expenditure on defense services, such as military salaries, maintenance, and other related expenses, is a significant component of government revenue expenditure. It represents the cost of maintaining and running the armed forces and is a recurring cost that is funded from the government's revenue.

(C) Central assistance for states : Central assistance provided to states, which includes grants and allocations for various purposes like social programs, infrastructure development, and other state-specific needs, is a form of revenue expenditure. This assistance is funded from the government's revenue and is meant to support state expenditures.

(D) Interest payments : Interest payments on government loans and borrowings constitute a major component of revenue expenditure. The government must use its revenue to service its debt by paying interest to bondholders and creditors. This is a recurring cost associated with the servicing of debt obligations and is funded from revenue sources.

Options (A) Repayment of loans and (E) Lending to commercial banks are not categorized as revenue expenditure sources :

(A) Repayment of loans : Repayment of loans is a capital expenditure, not a revenue expenditure. It involves returning borrowed money principal, and it does not directly impact the day-to-day operations and expenses of the government.

(E) Lending to commercial banks: Lending to commercial banks typically involves providing funds to these banks, which may later be repaid with interest. This financial transaction, in itself, is not a form of revenue expenditure by the government.

So, options (B), (C), and (D) are sources of revenue expenditures because they represent ongoing, regular expenses incurred by the government that are funded its revenue sources.

"Revenue Expenditure is expenditure incurred for purposes other than the creation of physical or financial assets of the central government. It relates to those expenses incurred for the normal functioning of the government departments and various services, interest payments on debt incurred by the government, and grants given to state governments and other parties (even though some of the grants may be meant for creation of assets). Budget documents classify total expenditure into plan and non-plan expenditure. According to this classification, plan revenue expenditure relates to central Plans (the Five-Year Plans) and central assistance for State and Union Territory plans. Non-plan expenditure, the more important component of revenue expenditure, covers a vast range of general, economic and social services of the government. The main items of non-plan expenditure are interest payments, defence services, subsidies, salaries and pensions. Interest payments on market loans, external loans and from various reserve funds constitute the single largest component of non-plan revenue expenditure. "