UPSC Prelims 2014 Question:

With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure?

1. Defence expenditure 
2. Interest payments 
3. Salaries and pensions
4. Subsidies
   
   

Select the correct answer using the code given below:

Explanation:

• The government's total spending can be divided into two broad sub-heads, planned expenditure and non-planned expenditure. non-planned expenditure constituting the bulk of expenditure.
  
  
• Non-plan expenditure is what the government spends on the so-called non-productive areas and is mostly obligatory in nature. It includes salaries, subsidies, loans, interest and defence expenditures.
  
  
• Plan expenditure, on the other hand, pertains to the money set aside for productive purposes like various projects of ministries. It is spent on productive asset creation through Centrally-sponsored programmes and flagship schemes.
  
  
• Plan and non-plan expenditure has now been replaced by capital and revenue spending classification.
  
  

Therefore, option (3) is the correct answer.

Subject: Economics | Public Finance