Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (Answer in 150 words)

The Union Budget separates government receipts and expenditure according to whether they alter assets and liabilities or represent recurring operations.

Capital Budget

• Capital receipts create liabilities or reduce assets: market borrowing, external loans, recovery of loans and disinvestment proceeds.
• Capital expenditure creates assets or reduces liabilities: infrastructure, defence equipment, equity investment in public enterprises and repayment of debt.
• It generally supports productive capacity and long-term growth.

Revenue Budget

• Revenue receipts include tax revenue, non-tax revenue, dividends, interest and fees; they neither create liabilities nor reduce assets.
• Revenue expenditure covers salaries, pensions, subsidies, interest payments, grants and routine administration.
• It maintains existing services but may also create human capital through education and health spending.

Key distinction

Borrowing-funded capital expenditure can expand future capacity, whereas persistent revenue deficits constrain fiscal space. The quality and outcome of spending matter more than classification alone.

Capital receipts; revenue receipts; asset creation; liabilities; fiscal deficit; revenue deficit.