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Question

Difficulty: MediumEconomic Developments, Union & State Budgets, and Economic Surveys

Regarding the accounting classification of receipts and expenditures in the Union Budget of India, which of the following statements are correct?

  1. Sovereign Green Bonds issued by the Government of India are accounted for as part of market borrowings within Capital Receipts.Answer
  2. B
    Disinvestment proceeds from the sale of government equity in Public Sector Undertakings are categorized as Non-Tax Revenue Receipts.
  3. Interest payments made by the Central Government on accumulated public debt are classified under Revenue Expenditure.Answer
  4. D
    Grants-in-aid given by the Central Government to State Governments for the creation of capital assets are recorded directly under Capital Expenditure in the main Budget statement.

Answer

The correct statements are that Sovereign Green Bonds form part of market borrowings under Capital Receipts, and interest payments on public debt are classified under Revenue Expenditure.
Sovereign Green Bonds add to government debt liabilities and are correctly included in market borrowings under Capital Receipts. Similarly, interest payments on past debt obligations do not build assets or reduce principal liability, making them recurring Revenue Expenditure.

Step-by-Step Solution

1
Analyze the accounting nature of Sovereign Green Bonds
Green Bonds generate debt liabilities for borrowing funds for public sector projects, placing them correctly under Capital Receipts (internal debt).
Any financial transaction that creates a liability is categorized under capital accounting.
2
Evaluate the classification of disinvestment proceeds
Disinvestment involves selling state assets without creating debt, categorizing it as a Non-Debt Capital Receipt.
Transactions that liquidate government assets belong to capital receipts, not revenue receipts.
3
Examine interest servicing and grants-in-aid entries
Interest servicing is a recurring operational outlay (Revenue Expenditure). Central grants to states, regardless of end-use, are legally classified as Revenue Expenditure of the Union.
Revenue expenditure covers routine operational expenses and transfers that do not directly increase central capital assets.

Key Concept

Budgetary Classification of Revenue and Capital Accounts in the Union Budget
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Topics

Economic Developments, Union & State Budgets, and Economic Surveys

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