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WHAT IS CAPITAL BUDGET

Capital Budget consists of capital receipts (like disinvestment, borrowing, loans from public or foreign governments, Reserve Bank of India, etc) and capital expenditure (like expenditure on development of machinery, health facilities, etc).
 
Capital budgeting comprises two words — 'capital' and 'budget'. It implies setting targets for projects/schemes to ensure maximum profitability.
 
Parts of Capital Budget: Capital budget is divided into two parts — capital receipts and capital expenditure.
 
Capital receipts in Union Budget
 
Capital receipts refer to incoming cash flows. They can be both non-debt and debt receipts. Loan from the general public, foreign governments and RBI form a major part of capital receipts.
 
Example of capital receipts: Recovery of loans and advances given to state governments and foreign governments, disinvestment proceeds, money accrued to the government from issue of bonus shares, etc, are all examples of non-debt capital receipts.
 
Debt receipts are those which the government needs to repay along with interest. Most of the government's capital receipts are debt receipts. They are shown as liabilities in the government’s balance sheet.
 
Capital expenditure in Union Budget
 
Capital expenditure is the expenditure on the development of machinery, equipment, building, health facilities, acquisition of assets like land, research & development, education, etc.
 
Examples of capital expenditure: Loans given by the government to states and public-sector undertakings (PSUs), loans that were taken in the past but are now returned, spending on infrastructure, machinery, land, road, etc.
 

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