GOI to provide Rs 15,000 crore to States for Capital Expenditure: Basics Explained

The Ministry of Finance, Government of India has decided to provide an additional amount of upto Rs 15,000 crore to States as interest free 50 year loan for spending on capital projects.

The Department of Expenditure has issued fresh guidelines in this regard on the “Scheme of Financial Assistance to States for Capital Expenditure”  for the financial year 2021-22.The Finance Minister had in her budget speech announced that the Centre would take measures to nudge States to spend more on infrastructure and to incentivize disinvestment of their public sector enterprises.


Revenue Receipts:

Government receipts which neither (i) create liabilities nor (ii) reduce assets are called revenue receipts; taxes, interest and dividend on government investment, cess and other receipts for services rendered by the government.

Capital Receipts:

Government receipts which either (i) create liabilities (e.g. borrowing) or (ii) reduce assets (e.g. disinvestment) are called capital receipts. Thus when govt. raises funds either by incurring a liability or by disposing off its assets, it is called a capital receipt.

Revenue Expenditure

Refers to spending which include salaries, interest payments and other such recurrent spending.

Capital Expenditure

Refers to spending which leads to the creation of assets yielding financial or social returns. Capital expenditure is incurred to create long-term assets such as factories, buildings and other development.

Capital expenditure creates employment, especially for the poor and unskilled, has a high multiplier effect, enhances the future productive capacity of the economy, and results in a higher rate of economic growth.


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