The concept of Five-Year Plans in India was inspired by the Soviet Union's (USSR) central planning system.
The idea of the FYP 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: the ‘Plan-budget’ and the ‘Non-Plan’ budget.
A five-year plan has the advantage of permitting the government to focus on the larger picture and make a long-term intervention in the economy.
Non-plan budget:
- It is spent on routine items on a yearly basis.
- It is also known as revenue expenditure & refers to government spending on routine administrative and operational expenses, such as salaries, pensions, and interest payments on debt. It is not directly linked to the development objectives of the Five-Year Plans.
Plan budget :
- It is spent on a five-year basis as per the priorities fixed by the plan.
- It is also known as development expenditure & refers to government spending on programs and schemes that are included in the FYP. It includes spending on sectors such as agriculture, industry, infrastructure, health, education etc.
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