Through the PDS, the government provides food grains to the poor at a subsidised rate. In the government budget, such a food subsidy is classified as:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Revenue expenditure
Revenue expenditure is spending that creates no physical or financial asset for the government. A food subsidy only lowers the price paid by the poor; it builds no asset. So it is revenue expenditure.
Option (1) Capital expenditure, as it builds stocks of grain — Incorrect. Capital expenditure creates assets. Grain given to the poor at a low price is consumed, so no asset is created.
Option (2) Revenue expenditure — Correct. A subsidy creates no asset.
Option (3) Capital receipt — Incorrect. A receipt is money coming in to the government. A subsidy is money going out.
Option (4) Revenue receipt — Incorrect. Revenue receipts are taxes and non-tax income the government receives.
This question uses Rural Development and Government Budget and the Economy together.
NCERT (2026-27): “5.4 Agricultural Market System … The fourth element is the policy instruments like (i) assurance of minimum support prices (MSP) for agricultural products (ii) maintenance of buffer stocks of wheat and rice by Food Corporation of India and (iii) distribution of food grains and sugar through PDS. These instruments are aimed at protecting the income of the farmers and providing foodgrains at a subsidised rate to the poor. …” Government Budget and the Economy: “Revenue Expenditure is expenditure incurred for purposes other than the creation of physical or financial assets of the central government. … Subsidies are an important policy instrument which aim at increasing welfare. Apart from providing implicit subsidies through under-pricing of public goods and services like education and health, the government also extends subsidies explicitly on items such as exports, interest on loans, food and fertilisers. …” |