Expenditures incurred for purposes other than the creation of physical or financial assets of the central government are classified as which of the following?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Revenue Expenditure
Some government spending leaves something behind, such as a road or shares in a company. Much of it does not: the running of departments and services, interest payments on debt and grants to state governments are spent and gone, and create no physical or financial asset. Such spending is classed as revenue expenditure.
Why the other options are incorrect
Option (1) Capital Expenditure — Incorrect. Capital expenditure is the opposite class: expenditure that results in the creation of physical or financial assets or a reduction in financial liabilities, such as buying land, buildings and machinery, investment in shares, and loans to state governments.
Option (2) Public Expenditure — Incorrect. Public expenditure is all spending by the government, revenue and capital together, so it does not name the class without assets.
Option (3) Consumption Expenditure — Incorrect. Consumption expenditure is the spending of households on goods and services for their own use; it is not a class of the government budget.
NCERT (2025-26): “Revenue Expenditure … Revenue Expenditure is expenditure incurred for purposes other than the creation of physical or financial assets of the central government. It relates to those expenses incurred for the normal functioning of the government departments and various services, interest payments on debt incurred by the government, and grants given to state governments and other parties (even though some of the grants may be meant for creation of assets).… Capital Expenditure There are expenditures of the government which result in creation of physical or financial assets or reduction in financial liabilities. This includes expenditure on the acquisition of land, building, machinery, equipment, investment in shares, and loans and advances by the central government to state and union territory governments, PSUs and other parties.…” |