Which of the following statements is correct about the two types of Budget in India?

Statement A- Plan Budget is spent on routine items on a yearly basis.

Statement B- Non-Plan Budget is spent on a five-year basis as per the priorities fixed by the plan.

Both Statements are incorrect.

The correct answer is Option 4 - Both Statements are incorrect.

Statement A- Plan Budget is spent on routine items on a yearly basis. This is incorrect. Plan Budget is not spent on routine items. It is spent on developmental activities and plans (like Five-Year Plans, infrastructure, growth projects).

Statement B- Non-Plan Budget is spent on a five-year basis as per the priorities fixed by the plan. This is incorrect. Non-Plan Budget is not based on five-year plans. It is spent on routine government expenses such as salaries, interest payments, defence, subsidies, etc.

NCERT: "As in the USSR, the Planning Commission of India opted for five year plans (FYP). The idea is very simple: the Government of India prepares a document that has a plan for all its income and expenditure for the next five years. Accordingly the budget of the central and all the State governments is divided into two parts: ‘non-plan’ budget that is spent on routine items on a yearly basis and ‘plan’ budget that is spent on a five year basis as per the priorities fixed by the plan. A five year plan has the advantage of permitting the government to focus on the larger picture and make long-term intervention in the economy"