Interest payments on market loans, external loans and from various reserve funds are classified in the budget as:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → non-plan revenue expenditure
Interest on loans is paid for debt already taken. It creates no asset, so it is revenue expenditure. It is the single largest item of non-plan revenue expenditure.
NCERT (2026-27): “Revenue Expenditure … 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. Defence expenditure, is committed expenditure in the sense that given the national security concerns, there exists little scope for drastic reduction. …” |