Revenue Expenditure

Meaning

Revenue expenditure refers to those expenditure of the government which are incurred for the normal, day-to-day running of the Govt. departments. It does not create any assets. Revenue expenditure is met out of the tax and non-tax revenue receipts of the government.

Composition

(i) Defense expenditure – This is an important part of central govt’s revenue expenditure. This includes the salaries, allowances of defense personnel, pension of retired defense personal etc.

(ii) General Services – It includes civil administration, different organs of the govt. like parliament, secretariat, police, law & justice etc. Generally the salaries, allowances, pension and other current expenditures are included in this category.

(iii) Interest payment – The govt. pays interest on the public debt every year. This is included in revenue expenditure. Now a major portion of revenue expenditure of the govt. is spent on interest payment and this is a serious problem for the country.

(iv) Grants-in-aid to States – The grants-in-aid given to the states and union territories are included in revenue expenditure.

(v) Cost of tax collection – Govt. collects different kinds of tax and cost of collection of these taxes is revenue expenditure.

(vi) Economic Service – The current expenditure incurred by the govt. for the development of agriculture, industry, trade and commerce is included in revenue expenditure.