Read the following statements:
Statement I: The Medium-term Fiscal Policy Statement also examines how productively capital receipts, including market borrowings, are being utilised.
Statement II: One criticism of the plan and non-plan classification of expenditure is that it led to the misperception that non-plan expenditure is inherently wasteful.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both Statement I and Statement II are true.
Statement I: The Medium-term Fiscal Policy Statement also examines how productively capital receipts, including market borrowings, are being utilised. — True. Besides a three-year rolling target, this FRBMA statement checks whether revenue expenditure can be met from revenue receipts and how well capital receipts are used.
Statement II: One criticism of the plan and non-plan classification of expenditure is that it led to the misperception that non-plan expenditure is inherently wasteful. — True. Salaries are non-plan spending. Calling such spending wasteful hurt education and health, where salaries are a large part of the cost.
NCERT (2026-27): “Capital Expenditure … Along with the budget, three policy statements are mandated by the Fiscal Responsibility and Budget Management Act, 2003 (FRBMA)4. The Medium-term Fiscal Policy Statement sets a three-year rolling target for specific fiscal indicators and examines whether revenue expenditure can be financed through revenue receipts on a sustainable basis and how productively capital receipts including market borrowings are being utilised. …” “A case against this kind of classification has been put forth on the ground that it has led to an increasing tendency to start new schemes/projects neglecting maintenance of existing capacity and service levels. It has also led to the misperception that non-plan expenditure is inherently wasteful, adversely affecting resource allocation to social sectors like education and health where salary comprises an important element.” |