Capital Expenditure
Capital expenditure is that part of government expenditure incurred for the creation and acquisition of fixed assets like land, building, machine, equipment etc. and for giving loans and advances to states.
These assets yield income in future. Capital expenditure is met out of capital receipts like loan recovery, foreign assistance, disinvestment of public enterprises and the like. Following are the main items of capital expenditure.
General Service
Expenditure to print notes and coins, construction of roads and buildings by the public works department, residential construction, contributions to IMF etc. are included in this category.
Defence Expenditure
Defence industries producing defence goods like arms and armaments, plants producing fighter planes, warships, water supply and sanitation, urban development, housing, social welfare etc. are included in capital expenditure.
Social Service
Expenditure incurred for the creation of fixed assets in department of education, health and family welfare, water supply and sanitation, urban development, housing , social welfare etc. are included in capital expenditure.
Economic Service
Expenditure incurred for creation and acquisition of fixed assets in mines, minerals, industries, animal husbandry, irrigation, power, transport and communication etc. are included in capital expenditure.
Loan and Advances to States
Loans and advances given to states and union territories for creation of assets is treated as capital expenditure.
Differences
- Capital expenditure helps in creation of assets and capital formation for the economy. But revenue expenditures are incurred to meet the current expenditure of the govt. It does not create any capital or asset.
- The benefits of capital expenditure accrue to the community over the years. But the benefits of revenue expenditure are confined to a financial year only.
