Budget Glossary

1. Revenue Receipts

2. Tax Revenue (net to centre)

3. Non-Tax Revenue

4. Capital Receipts (5+6+7)

5. Recoveries of Loans

6. Other Receipts

7. Borrowings and other liabilities

8. Total Receipts (1+4)

9. Non-Plan Expenditure

10. On Revenue Account of which,

11. Interest Payments

12. On Capital Account

13. Plan Expenditure

14. On Revenue Account

15. On Capital Account

16. Total Expenditure (9+13)

17. Revenue Expenditure (10+14)

18. Capital Expenditure (12+15)

19. Revenue Deficit (17-1)

20. Fiscal Deficit {16-(1+5+6)}

21. Primary Deficit (20-11)

Total Receipts = REVENUE RECEIPTS + CAPITAL RECEIPTS.

Revenue Receipts
Revenue receipts of the government can be understood as the equivalent of the income of
a corporate or an individual. Revenue receipts do not create any repayment obligation on
the part of the government, unlike CAPITAL RECEIPTS.
The government earns its revenue chiefly in 2 different ways:
1. TAX REVENUE; and
2. NON-TAX REVENUES raised by selling some goods and services to the people.
Any shortfall in the government’s revenue receipts in relation to its REVENUE
EXPENDITURE leads to REVENUE DEFICITS, one of the 3 important measures of
deficit that economists and investors look at in order to gauge the health of the economy
and how well it is being managed.
Direct Taxes [38% of the Union Government’s GROSS TAX REVENUE, and a little
over 20% of its TOTAL RECEIPTS]
Currently, the central direct taxes comprise:
 Corporation tax,
 Personal income tax, and
 Wealth tax
Indirect Taxes [Currently, the central indirect taxes account for approximately 62% of
the Union Government’s GROSS TAX REVENUE and more than one-third of the
government’s TOTAL RECEIPTS]
It comprises:
1. Excise duty levied on domestic industrial production,
2. Customs duty imposed on the import of goods from other countries and export duty
levied on export of some goods, and
3. Service tax levied on service provided by one person or company to another, such as
insurance, advertising, brokerage, etc.
Gross Tax Revenue = Direct + Indirect taxes
Net Tax Revenue = Gross Tax Revenue – States’ shares of Gross Tax
Net tax revenue is the single largest source of revenue of the Union Government
accounting, at an average in the last few years, for more than 70% of the total REVENUE
RECEIPTS of the government. The balance comes from NON-TAX REVENUE, i.e.
from revenue items other than taxes.
Also, tax revenue currently accounts for approximately 40% of the government’s total
receipts of money in a year.
States’ Share of Gross Tax Revenue: A portion of the gross tax revenue collected by the
Union Government is distributed to the various states. The portion distributed is based on
the recommendations of the Finance Commission appointed by the President of India
once in every five years, which recommends the devolution of non-plan revenue
resources between centre and the states. In the last few years, this states’ share of the
gross tax revenue has been approximately 25%.
Capital Receipts: It includes
1. Borrowings and other liabilities, namely loans raised by the Centre from the market,
from the RBI and other financial institutions, through sale of Treasury Bills and
government securities, and loans received from foreign governments form one part of
capital receipts;
2. Recovery of loans earlier granted by the Centre to State governments and Union
Territories; and
3. Proceeds from disinvestment of the government’s stake in Public Sector Undertakings.
Of the 3 main sources listed above, BORROWINGS AND OTHE LIABILITIES is by far
the largest component, currently forming more than 80% of capital receipts.
Capital receipts currently form a little over 40% of the government’s TOTAL
RECEIPTS.
In addition to the above market borrowings, the government incurs liabilities in
encouraging people to save through such avenues as for public provident fund (PPF),
small savings schemes such as post office savings deposits, Indira Vikas Patra and Kisan
Vikas Patra etc. All moneys collected through such schemes go into the National Small
Savings Fund (NSSF), of which 75 percent are invested in various state government
securities and the balance in central government securities, which become its other
liabilities.
Total Expenditure
One way the Union Budget classifies the total expenditure is:
1. Revenue Expenditure, which forms more than 80% of the total expenditure;
Expenditure on salaries, pensions, police and other services or interest payments, etc. and
2. Capital expenditure, which currently accounts less than 20% of the government’s total
expenditure. It is the money spent on the creation of public assets whether it be on roads
or dams, etc.
Each of the above expenditures is further classified as:
1. Plan Expenditure; and
2. Non-Plan Expenditure.
Money spent annually on projects taken up as part of the 5-year plans is categorised as
the former; the rest comprises Non-Plan expenditure. Non-plan expenditure accounts for
about three-fourths of the government’s revenue expenditure.
Non-plan Capital Expenditure
Non-plan capital expenditure is the money spent by the central government in creating
both physical and financial public assets.
A major portion of the non-plan capital expenditure goes towards purchase of defence
equipment.
Loans granted to states, UTs, public sector enterprises and foreign governments are also
items of non-plan capital expenditure, which create financial assets for the government.
Non-plan capital expenditure is about 6% of the government’s TOTAL EXPENDITURE.
Non-plan Revenue Expenditure
All expenses which the central government incurs in running and administering all its
multi-farious and far-flung activities and public services.
The main components of non-plan revenue expenditure are:
 Interest payments on the government’s BORROWING AND OTHER LIABILITIES.
This is the single largest component of the non-plan revenue expenditure;
 Subsidies, including on food, fertiliser, kerosene and export promotion, are the next
largest component of the central government’s non-plan revenue expenditure;
 Pensions paid to various retired government employees
 Expenditure for maintaining central police forces, such as CRPF and ITBP;
 Grants made by central government to state governments, union territories etc.
 Expenses incurred in providing various social and economic services, such as
education, health, agricultural research and extension services, transportation and
communication services etc.
Non-plan revenue expenditure is the biggest item in government’s total expenditure,
accounting for two-thirds of the latter.

Plan Expenditure
Money spent by the central government on programmes included in the 5-year plans is
called plan expenditure. Some of this expenditure is incurred directly by the centre; other
expenditure is in the form of central government’s assistance for the plans of various
states and union territories.
Like all government expenditure, plan expenditure is also divided into two portions:
1. Plan capital expenditure which is money spent on creating assets; and
2. Plan revenue expenditure, which is in the nature of expenses that don’t lead to any
asset creation.
Plan expenditure currently amounts to less than 30% of government’s TOTAL
EXPENDITURE.
The relatively decline in the share of plan expenditure in the government’s total
expenditure has been a matter of great concern among economists since it curbs the
extent of plan projects that the government can undertake.
Deficits
Deficits, as the meaning of the word itself suggests, mean shortfalls in government
revenues vis-à-vis its expenditure.
Deficits can be differently defined depending on what one is looking at. Primarily, three
important and widely discussed deficits are:
1. REVENUE DEFICIT; [Currently, the central government’s budget runs a revenue
deficit; the government’s revenue expenditure is almost 150% of its revenue receipts]
2. FISCAL DEFICIT; [Most economists hold that fiscal deficit by itself need not be
bad. Some amount of fiscal deficit is, in fact, held to provide a growth stimulus to the
economy. What worries them is if it goes on rising as a percentage of the GDP. In such a
situation, inflation becomes a potent danger]
3. PRIMARY DEFICIT [Primary deficit is a measure for assessing the shortfall in the
central government’s current year’s revenue against its expenditure for the year. Thus,
while FISCAL DEFICIT measures the total budgetary shortfall, primary deficit is arrived
at by reducing the interest payable by the government from the fiscal deficit, since
interest payments are a result of actions of the past rather than those of the ongoing year.
Primary deficit serves to turn the spotlight on the financial implications of government’s
current budgetary actions, ignoring the accumulated sins of the past since there is little
that can be done about liabilities incurred earlier. Primary deficit allows a scrutiny of the
discretionary, or controllable, portion of the deficit]