Economics · Fiscal Budget
While classifying the components of the Union Budget, the government distinguishes between Revenue Expenditure and Capital Expenditure. If the Government of India decides to provide a massive grant-in-aid to a State Government specifically for the purpose of constructing a new high-speed rail corridor, how will this transaction be recorded in the Union Budget of the Central Government?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It will be recorded under the Contingency Fund of India as it is a special purpose grant for infrastructure.
- 2It will be recorded as a Capital Receipt because the State Government will eventually repay the grant to the Central Government.
- 3It will be recorded as Revenue Expenditure because grants given to State Governments do not create direct assets for the Central Government.✓
- 4It will be recorded as Capital Expenditure since it results in the creation of a physical asset for the nation.
Correct answer
It will be recorded as Revenue Expenditure because grants given to State Governments do not create direct assets for the Central Government.
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