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Q12 (IAS/2016) Economy › Government Finance & Budget › Budget classification Official Key

Which of the following is/are included in the capital budget of the Government of India? 1. Expenditure on acquisition of assets like roads, buildings, machinery, etc. 2. Loans received from foreign governments 3. Loans and advances granted to the States and Union Territories Select the correct answer using the code given below.

Result
Your answer: —  ·  Correct: D

Explanation

The correct answer is option D because all three statements are included in the capital budget of the Government of India.

Statement 1 is correct as capital expenditure results in creation of physical or financial assets, and includes expenditure on the acquisition of land, building, machinery, and equipment[1]. Statement 2 is correct because loans received from foreign governments are capital receipts, as they create liability for the government[2]. Statement 3 is correct since loans and advances by the central government to state and union territory governments are part of capital expenditure[1].

The capital budget comprises both capital receipts (which create liabilities or reduce assets) and capital expenditure (which create assets or reduce liabilities). All three components mentioned in the question fall under these categories and are therefore part of the capital budget.

Sources
  1. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Capital Expenditure > p. 70
  2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.4 Budget Classification > p. 152
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Q. Which of the following is/are included in the capital budget of the Government of India? 1. Expenditure on acquisition of assets like ro…
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 · 0/10
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This is a foundational 'Sitter' directly from NCERT Macroeconomics Class XII. It tests the core definition of the Capital Budget: does the transaction change the Asset or Liability status of the government? If you missed this, your static economy base is shaky.

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 expenditure on acquisition of assets such as roads, buildings, and machinery included in the capital budget of the Government of India?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Capital Expenditure > p. 70
Presence: 5/5
“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. Capital expenditure is also categorised as plan and non-plan in the budget documents. Plan capital expenditure, like its revenue counterpart, relates to central plan and central assistance for state and union territory plans. Non-plan capital expenditure covers various general, social and economic services provided by the government. The budget is not merely a statement of receipts and expenditures.”
Why this source?
  • Explicitly lists acquisition of land, building, machinery, equipment as part of capital expenditure.
  • Defines capital expenditure as creation of physical or financial assets or reduction in liabilities.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 4.4 Budget Classification > p. 152
Presence: 5/5
“It also includes small savings schemes (Post office savings accounts, National Savings Certificates etc.), Provident Funds and net receipts obtained from the sale of shares in PSUs (disinvestment). Capital Expenditure: Those expenses of the government which either creates assets (physical or financial) or reduces liabilities are called capital expenditures. Capital expenditures include acquisition of land, building, machinery, equipment, purchase of shares by the government and loans and advances by the central government to state and union territory governments, PSUs and other parties.”
Why this source?
  • Defines capital expenditures as those that create assets (physical or financial).
  • Specifically includes acquisition of land, building, machinery and equipment.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2. Capital Expenditure > p. 108
Presence: 5/5
“Capital expenditure results in the acquisition of a tangible or intangible asset or payment of liabilities. Thus, it impacts the asset-liability status of the Government. Capital expenditures are focussed on GDP growth and thereby incurred on building durable assets like highways, multipurpose dams, irrigation projects, buying machinery and equipment. They are non-recurring type of expenditures also in the form of capital investments.”
Why this source?
  • States capital expenditure results in acquisition of tangible/intangible assets.
  • Gives examples such as highways, dams, irrigation projects, machinery — matching roads/buildings/machinery.
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