Which part of the budget is spent on a five-year basis as per the priorities fixed by the plan?

Planned

The correct answer is Option 2 - Planned

The PLANNED part of the budget is spent on a five-year basis as per the priorities fixed by the plan

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 are divided into two parts: the ‘non-plan’ budget which is spent on routine items on a yearly basis, and the ‘plan’ budget which 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 interventions in the economy.