The Capital Budget is an account of the assets as well as liabilities of the central government, which takes into consideration changes in capital. It consists of capital receipts and capital expenditure of the government. This shows the capital requirements of the government and the pattern of their financing.
The main items of capital receipts are loans raised by the government from –
- the public which are called market borrowings,
- the Reserve Bank and commercial banks and other financial institutions through the sale of treasury bills,
- loans received from foreign governments and international organisations, and
- recoveries of loans granted by the central government.
Other items include –
- small savings (Post-Office Savings Accounts, National Savings Certificates, etc),
- provident funds, and
- net receipts obtained from the sale of shares in Public Sector Undertakings (PSUs).
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.
Bibliography : NCERT – Introductory Macroeconomics