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Q100 (IAS/2014) Economy › Government Finance & Budget › Budget classification Official Key

With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure? 1. Defence expenditure 2. Interest payments 3. Salaries and pensions 4. Subsidies Select the correct answer using the code given below.

Result
Your answer: —  ·  Correct: C
Explanation

Non-plan expenditures were related to obligatory yet routine functioning of the Central Government such as interest payment, subsidies, defence expenditure, salaries and pension, etc.[2] This classification was part of the Indian budget system during the era of the Planning Commission.

The main items of non-plan expenditure are interest payments, defence services, subsidies, salaries and pensions.[4] Therefore, all four items mentioned in the question—defence expenditure, interest payments, salaries and pensions, and subsidies—were covered under Non-Plan Expenditure.

Since this question is from 2014, it pertains to the budget classification system that was in use at that time. This classification has been scrapped and now the budget is classified only in terms of revenue expenditure and capital expenditure.[1] However, for the reference year of this question, all four components were indeed part of Non-Plan Expenditure.

The correct answer is option C: 1, 2, 3 and 4.

Sources
  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
  3. [3] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
  4. [4] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
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Q. With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure? 1. Defence expenditure 2. Interest pa…
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 · 0/10

This is a 'Sitter' directly lifted from NCERT Class XII Macroeconomics. It tests the fundamental classification of the Union Budget (pre-2017 reforms). The question demands rote memory of standard examples provided in basic textbooks, not advanced economic analysis.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Is defence expenditure included under Non-Plan Expenditure in the Union Budget of India?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
Presence: 5/5
“It included both revenue expenditure (like grant-in-aid to states, etc.) and capital expenditure (expenditure on construction of highways, hospitals, etc.). Non-plan expenditures were related to obligatory yet routine functioning of the Central Government such as interest payment, subsidies, defence expenditure, salaries and pension, etc. However, this classification has been scrapped and now the budget is classified only in terms of revenue expenditure and capital expenditure.”
Why this source?
  • Explicitly lists 'defence expenditure' among examples of non-plan expenditures.
  • Frames non-plan expenditures as routine/obligatory items (interest, subsidies, salaries, pensions, defence).
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
Presence: 5/5
“government. 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. Subsidies are an important policy instrument which aim at increasing welfare. Apart from providing implicit subsidies through under-pricing of public goods and services like education and health, the government also extends subsidies explicitly on items such as exports, interest on loans, food and fertilisers.”
Why this source?
  • NCERT explicitly states defence services are a main item of non-plan expenditure.
  • Emphasises defence as 'committed expenditure' with little scope for drastic reduction — consistent with non-plan characterization.
Politics in India since Independence, Textbook in political science for Class XII (NCERT 2025 ed.) > Chapter 3: Politics of Planned Development > The Early Initiatives > p. 49
Presence: 3/5
“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 is divided into two parts: 'non-plan' budget that is spent on routine items on a yearly basis and 'plan' budget that is spent on”
Why this source?
  • Explains the budget division into 'non-plan' for routine yearly items and 'plan' for five-year plans.
  • Supports the interpretation that routine/state-obligatory items (such as defence) fall under non-plan.
Statement 2
Are interest payments included under Non-Plan Expenditure in the Union Budget of India?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
Presence: 5/5
“It included both revenue expenditure (like grant-in-aid to states, etc.) and capital expenditure (expenditure on construction of highways, hospitals, etc.). Non-plan expenditures were related to obligatory yet routine functioning of the Central Government such as interest payment, subsidies, defence expenditure, salaries and pension, etc. However, this classification has been scrapped and now the budget is classified only in terms of revenue expenditure and capital expenditure.”
Why this source?
  • Explicitly lists 'interest payment' among non‑plan expenditures (alongside subsidies, defence, salaries, pensions).
  • States the historical classification where non‑plan expenditure covered obligatory routine items such as interest payments.
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
Presence: 5/5
“government. 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. Subsidies are an important policy instrument which aim at increasing welfare. Apart from providing implicit subsidies through under-pricing of public goods and services like education and health, the government also extends subsidies explicitly on items such as exports, interest on loans, food and fertilisers.”
Why this source?
  • NCERT identifies interest payments as a main item of non‑plan expenditure.
  • Notes interest payments (market/external/reserve funds) are the single largest component of non‑plan revenue expenditure.
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 69
Presence: 4/5
“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). 69 and the Economy Government Budget Budget documents classify total expenditure into plan and non-plan expenditure3 . This is shown in item 6 on Table 5.1 within revenue expenditure, a distinction is made between plan and non-plan.”
Why this source?
  • Defines revenue expenditure to include interest payments and explains budget documents distinguish revenue expenditure into plan and non‑plan items.
  • Connects interest payments (a revenue expense) with the plan/non‑plan classification used in budgets.
Statement 3
Are salaries and pensions included under Non-Plan Expenditure in the Union Budget of India?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
Presence: 5/5
“It included both revenue expenditure (like grant-in-aid to states, etc.) and capital expenditure (expenditure on construction of highways, hospitals, etc.). Non-plan expenditures were related to obligatory yet routine functioning of the Central Government such as interest payment, subsidies, defence expenditure, salaries and pension, etc. However, this classification has been scrapped and now the budget is classified only in terms of revenue expenditure and capital expenditure.”
Why this source?
  • Explicitly lists 'salaries and pension' among routine/obligatory items classified as non-plan expenditure.
  • Describes non-plan expenditure as covering recurring obligations (interest, subsidies, defence, salaries/pensions), directly answering the question.
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
Presence: 5/5
“government. 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. Subsidies are an important policy instrument which aim at increasing welfare. Apart from providing implicit subsidies through under-pricing of public goods and services like education and health, the government also extends subsidies explicitly on items such as exports, interest on loans, food and fertilisers.”
Why this source?
  • States the main items of non-plan expenditure and includes 'salaries and pensions' in that list.
  • Frames salaries and pensions as a primary component of non-plan revenue expenditure, reinforcing inclusion.
Statement 4
Are subsidies included under Non-Plan Expenditure in the Union Budget of India?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
Presence: 5/5
“It included both revenue expenditure (like grant-in-aid to states, etc.) and capital expenditure (expenditure on construction of highways, hospitals, etc.). Non-plan expenditures were related to obligatory yet routine functioning of the Central Government such as interest payment, subsidies, defence expenditure, salaries and pension, etc. However, this classification has been scrapped and now the budget is classified only in terms of revenue expenditure and capital expenditure.”
Why this source?
  • Explicitly lists subsidies among routine items classified as non‑plan expenditure (alongside interest, defence, salaries, pensions).
  • Context notes the traditional plan/non‑plan framework used in budgets, showing subsidies were part of non‑plan obligations.
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
Presence: 5/5
“government. 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. Subsidies are an important policy instrument which aim at increasing welfare. Apart from providing implicit subsidies through under-pricing of public goods and services like education and health, the government also extends subsidies explicitly on items such as exports, interest on loans, food and fertilisers.”
Why this source?
  • States the main items of non‑plan expenditure and includes subsidies in that list.
  • Describes subsidies as an important policy instrument counted under non‑plan revenue expenditure.
Pattern takeaway: UPSC Economy is often less about complex curves and more about 'Categorization'. Questions like 'Which of these are Capital Account?' or 'Which of these are Non-Plan?' appear repeatedly. Master the components of BOP, Budget, and Money Supply (M1/M3).
How you should have studied
  1. [THE VERDICT]: Sitter. Direct hit from NCERT Class XII Macroeconomics, Chapter 5 (Government Budget and the Economy).
  2. [THE CONCEPTUAL TRIGGER]: Public Finance > Budget Structure > Classification of Expenditure (Plan vs Non-Plan, Revenue vs Capital).
  3. [THE HORIZONTAL EXPANSION]: Since Plan/Non-Plan is abolished (2017), pivot to: Revenue vs Capital Expenditure items (e.g., Grants for capital assets = Revenue Exp), Capital Receipts (Disinvestment, Loan Recovery), and 'Charged' vs 'Voted' Expenditure items.
  4. [THE STRATEGIC METACOGNITION]: When NCERT lists examples for a definition (e.g., 'The main items of non-plan expenditure are...'), memorize the list verbatim. UPSC Economy questions frequently ask you to sort specific items into the correct conceptual 'bucket'.
Concept hooks from this question
📌 Adjacent topic to master
S1
👉 Plan vs Non-Plan Expenditure (historical classification)
💡 The insight

The question hinges on the historical budget classification of expenditures into 'plan' and 'non-plan', described in the references.

High-yield for UPSC prelims and mains: many questions test understanding of budget structure and its evolution. Links to public finance, planning commission/Five-Year Plans, and fiscal policy. Prepare by memorising definitions, purposes, and examples of each category and tracking later changes to classification.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 108
  • Politics in India since Independence, Textbook in political science for Class XII (NCERT 2025 ed.) > Chapter 3: Politics of Planned Development > The Early Initiatives > p. 49
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
🔗 Anchor: "Is defence expenditure included under Non-Plan Expenditure in the Union Budget o..."
📌 Adjacent topic to master
S1
👉 Components of Non-Plan Expenditure
💡 The insight

References explicitly list the main items classified as non-plan (defence, interest payments, subsidies, salaries, pensions).

Frequently tested in MCQs and short-answer questions; knowing these components helps answer questions on committed vs discretionary spending and fiscal constraints. Study by making a concise list of examples and practising application to budget items.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
🔗 Anchor: "Is defence expenditure included under Non-Plan Expenditure in the Union Budget o..."
📌 Adjacent topic to master
S1
👉 Abolishment of Plan/Non-Plan Classification
💡 The insight

One reference notes the plan/non-plan classification was later scrapped — important context when answering timeline-based budget questions.

Important for mains/GS paper context: shows evolution of budgetary frameworks and reforms. Helps in answering comparative or timeline questions on budgeting practices. Revise the historical usage and the fact of its discontinuation as a distinct point.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 108
🔗 Anchor: "Is defence expenditure included under Non-Plan Expenditure in the Union Budget o..."
📌 Adjacent topic to master
S2
👉 Interest payments as a component of Non‑Plan Expenditure
💡 The insight

Multiple references explicitly identify interest payments as a primary item under non‑plan (committed) expenditure in the Union Budget.

High‑yield for UPSC as questions often ask about budget classification and major components of committed expenditure. Links to fiscal deficit, debt servicing and budgetary prioritisation topics. Master by memorising standard items classified under non‑plan/committed expenditure and practising related MCQs.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
🔗 Anchor: "Are interest payments included under Non-Plan Expenditure in the Union Budget of..."
📌 Adjacent topic to master
S2
👉 Revenue vs Capital Expenditure (and plan/non‑plan distinction)
💡 The insight

References show interest payments are revenue expenditure and that revenue expenditure was further split into plan and non‑plan categories in budget documents.

Important for questions on budget structure, fiscal policy and public finance. Helps answer items about classification of budget heads and implications for fiscal balances. Study by mapping common items to revenue/capital and to plan/non‑plan historically, and noting current classification changes.

📚 Reading List :
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 69
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
🔗 Anchor: "Are interest payments included under Non-Plan Expenditure in the Union Budget of..."
📌 Adjacent topic to master
S2
👉 Abolition of Plan/Non‑Plan classification
💡 The insight

Texts note the plan/non‑plan classification (which included interest as non‑plan) has been scrapped and budgets are now presented as revenue and capital expenditure.

Relevant for contemporary UPSC questions contrasting historical vs current budget presentation. Helps avoid outdated answers in mains/GS where current procedure matters. Learn timeline and rationale (e.g., abolition after Planning Commission) and link to current presentation formats.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 108
🔗 Anchor: "Are interest payments included under Non-Plan Expenditure in the Union Budget of..."
📌 Adjacent topic to master
S3
👉 Components of Non-Plan Expenditure
💡 The insight

The references explicitly enumerate what constitutes non‑plan expenditure (interest, defence, subsidies, salaries, pensions).

High-yield for UPSC questions on Union Budget composition and fiscal structure; helps answer direct MCQs and explain recurring vs development spending. Master by memorising typical line-items and practising classification-based questions.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Classification as Plan and Non-Plan Expenditure - Scrapped after abolishment of Planning Commission > p. 109
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Revenue Expenditure > p. 70
🔗 Anchor: "Are salaries and pensions included under Non-Plan Expenditure in the Union Budge..."
🌑 The Hidden Trap

The 'Charged Expenditure' list (Article 112(3)). Just as Non-Plan was a classification, 'Charged on the Consolidated Fund' is a constitutional classification. Items include: Emoluments of President, Chairman of Rajya Sabha, Speaker, Supreme Court Judges' pensions (not High Court), and Debt Charges (Interest).

⚡ Elimination Cheat Code

Use the 'Committed Liability' logic. Non-Plan expenditure essentially meant 'obligatory running costs' the government cannot escape. Interest payments (2) and Salaries/Pensions (3) are legally binding. If 2 and 3 are correct, you are left with Option B or C. Defence (1) is the single largest component of national security 'running cost' (standing army salaries/rations). It fits the 'obligatory' pattern perfectly. Thus, select All.

🔗 Mains Connection

Mains GS-3 (Fiscal Policy): The abolition of Plan/Non-Plan expenditure (based on Rangarajan Committee) was crucial to remove the bias against 'maintenance' spending. Previously, 'Plan' (new schemes) was glorified while 'Non-Plan' (maintenance/staffing) was neglected, leading to dilapidated assets (e.g., schools built but no teachers hired).

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SIMILAR QUESTIONS

IAS · 2002 · Q87 Relevance score: 3.74

With reference to the Indian Public Finance consider the following statements: 1. External liabilities reported in Union Budget are based on historical exchange rates 2. The continued high borrowing has kept the real interest rates high in the economy 3. The upward trend in the ratio of Fiscal Deficit to GDP in recent years has an adverse effect to private investments. 4. Interest payments is the single largest component of the non-plan revenue expenditure of the Union Government. Which of these statements are correct ?

IAS · 1997 · Q97 Relevance score: 3.28

Which of the following come under Non-plan expenditure ? I. Subsidies II. Interest payments III. Defence expenditure IV. Maintenance expenditure for the infrastructure created in the previous plans Choose the correct answer using the codes given below :

IAS · 1995 · Q31 Relevance score: 2.75

Which of the following are among the non-plan expenditures of the Government of India ? I. Defence expenditure II. Subsidies III. All expenditures linked with the previous plan periods IV. Interest payment Choose the correct answer from the codes given below : Codes :

CAPF · 2013 · Q90 Relevance score: 0.77

The following are some of the items of expenditure of the Central Government in India : 1. Interest payments 2. Major subsidies 3. Pensions 4. Loans and advances Which of the above is/are included in non-plan revenue expenditure?

CAPF · 2025 · Q17 Relevance score: 0.72

Which one among the following items of expenditure received the highest allocations in the Union Budget, 2025-26?