Loans and advances given by the central government to state governments and Public Sector Undertakings (PSUs) are shown in the central budget as:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → capital expenditure
A loan given by the Centre to a state or a PSU is a financial asset of the Centre, since the money will come back. Spending that creates an asset is capital expenditure.
When the loan is later repaid, that recovery is a capital receipt for the Centre.
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. …” |