capex, capital, expenditure

Rajnish Kumar, Chairman, State Bank of India

Capital Expenditure

Capital expenditure by states set to cross Rs 5 trillion in 2018-19

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Union Finance Minister Arun Jaitley is expected to address the two-day conclave at the State Bank of India (SBI) Academy in Gurugram

loans

graph

Currency, note

C Rangarajan

Govt capex to rise 25% to Rs 3.9 lakh crore by FY20

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	Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc. It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividend in future.&nbsp;<br />
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	The Budget estimate of the government&#39;s capital expenditure for the year 2020-21 was Rs 1,084,748 crore. The revised estimates of capital expenditure for the 2019-20 Budget came at Rs 1,059,472 crore, while the actuals for the 2018-19 Budget stood at Rs 915,670 crore.</div>
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	<strong>Understanding capital expenditure</strong></div>
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	Capital spending is associated with investment or development spending, where expenditure has benefits extending years into the future. Capital expenditure includes money spent on the following:</div>
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		Acquiring fixed and intangible assets</li>
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		Upgrading an existing asset</li>
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		Repairing an existing asset</li>
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		Repayment of loan</li>
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	<strong>Why is capital expenditure important?</strong></div>
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	Capital expenditure, which leads to the creation of assets are long-term in nature and allow the economy to generate revenue for many years by adding or improving production facilities and boosting operational efficiency. It also increases labour participation, takes stock of the economy and raises its capacity to produce more in future.</div>
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	Along with the creation of assets, repayment of loan is also capital expenditure, as it reduces liability.</div>
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	However, the government has to be cautious with the expenditure. In the financial year 2019-20, capital expenditure was 14.2 per cent of Budget Estimates. The government had to cut public spending sharply towards the end of the financial year in order that the deficit target could be met. Total expenditure fell by 0.3 percentage points in 2018-19 over 2017-18. This includes a 0.4 percentage point slash in revenue expenditure and 0.1 percentage point hike in capital expenditure.</div>
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	<strong>How is capital expenditure different from revenue expenditure?</strong></div>
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	Unlike capital expenditure, which creates assets for the future, revenue expenditure is one that neither creates assets nor reduces any liability of the government. Salaries of employees, interest payment on past debt, subsidies, pension, etc, fall under the category of revenue expenditure. It is recurring in nature.</div>
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RELATED BUDGET TERMS

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What is Capital Expenditure, Capital Expenditure Meaning, Budget News, Capital Expenditure Types

What is Capital Expenditure

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	Revenue receipts can be defined as those receipts which neither create any liability nor cause any reduction in the assets of the government. They are regular and recurring in nature and the government receives them in the normal course of activities.</div>
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	Revenue receipts include the proceeds from taxes and other duties levied by the Centre; the interest and dividend it receives on its investments; and the fees and charges the government receives for its services.</div>
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	Simply put, <strong>revenue receipts must satisfy two basic conditions:</strong></div>
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	<strong>No liability:</strong> Revenue receipts do not create any liability for the government. For example, taxes received by the government, unlike borrowings, do not create any liabilities for it.</div>
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	<strong>No asset reduction: </strong>Revenue receipts do not lead to any reduction in the government&rsquo;s assets. So, the government cannot show its earnings from sale of stake in a public-sector undertaking as revenue receipts because the stake sale resulted in reduction of its assets.</div>
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	For the government, there are two sources of revenue receipts &mdash; tax revenues and non-tax revenues.</div>

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What are Revenue Receipts, News, Budget 2020 News, Revenue Receipts Definition

Revenue Receipts

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	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).</div>
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	Capital budgeting comprises two words &mdash; &#39;capital&#39; and &#39;budget&#39;. It implies setting targets for projects/schemes to ensure maximum profitability.</div>
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	<strong>Parts of Capital Budget:</strong> Capital budget is divided into two parts &mdash; capital receipts and capital expenditure.</div>
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	<strong>Capital receipts in Union Budget</strong></div>
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	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.</div>
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	<strong>Example of capital receipts:</strong> 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.</div>
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	Debt receipts are those which the government needs to repay along with interest. Most of the government&#39;s capital receipts are debt receipts. They are shown as liabilities in the government&rsquo;s balance sheet.</div>
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	<strong>Capital expenditure in Union Budget</strong></div>
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	Capital expenditure is the expenditure on the development of machinery, equipment, building, health facilities, acquisition of assets like land, research &amp; development, education, etc.</div>
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	<strong>Examples of capital expenditure: </strong>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.</div>
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What is Capital Budget, Capital Budget Meaning, Budget News, Capital Budget Types

Capital Budget

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	The Union Budget, which is presented by the Finance Minister of India, comprises Capital Budget and Revenue Budget. The Capital Budget is further categorised into capital receipts and capital expenditure.</div>
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	<strong>What are Capital Receipts?</strong></div>
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	Capital receipts are receipts that create liabilities or reduce financial assets. They also refer to incoming cash flows. Capital receipts can be both non-debt and debt receipts. Loans from the general public, foreign governments and the Reserve Bank of India (RBI) form a crucial part of capital receipts.</div>
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	<strong>Understanding capital receipts</strong></div>
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	Capital receipts are loans taken by the government from the public, borrowings from foreign countries and institutes, and borrowings from the RBI. Recovery of loans given by the Centre to states and others is also included in capital receipts. In the balance sheet, capital receipts are mentioned in the liabilities section. The capital receipt has a nature of non-recurrence.</div>
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	All capital receipts are tax-free, unless there is a proviso to tax it. Capital receipts can be both non-debt and debt receipts</div>
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	<strong>Non-debt capital receipts</strong></div>
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	Non-debt receipts are those which do not incur any future repayment burden for the government. Almost 75 per cent of the total budget receipts are non-debt receipts.</div>
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	<strong>Examples of non-debt capital receipts:</strong> Recovery of loans and advances, disinvestment, issue of bonus shares, etc</div>
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	<strong>Debt capital receipts</strong></div>
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	Debt Receipts have to be repaid by the government. Around 25 per cent of government expenditure is financed through borrowing. A reduction in debt receipt (or borrowing) can be a big leap for the economy&#39;s financial health. Most of the capital receipts of the government are debt receipts</div>
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	<strong>Examples of debt capital receipts: </strong>Market loans, issuance of special securities to public-sector banks, issue of securities, short-term borrowings, treasury bills, securities against small savings, state provident funds, relief bonds, saving bonds, gold bonds, external debt, etc, are all example of debt capital receipts.</div>
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What are Capital Receipts, Capital Receipts Meaning, Budget News, Capital Receipts News

Capital Receipts

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	Government revenue refers to all the income of the government from taxes and non-tax sources. These funds are used for government expenditure. Government revenues and spending are an important part of fiscal policy of the government.</div>
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	Revenue refers to all the receipts of the government from taxes, custom duties, revenue from state-owned enterprises, capital revenues and foreign aid.</div>
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	<strong>Revenue is generated from mainly two types of sources:</strong></div>
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	<strong>Tax revenue</strong>: Taxes on incomes of individuals and corporations and also on the goods and services produced.</div>
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	<strong>Non-tax revenue:</strong> Dividends from state-run companies, central bank revenue and capital receipts in the form of external loans and debts from international financial institutions.</div>
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	India&rsquo;s total revenue in the April-November quarter of FY20 increased 12.9 per cent to Rs 10.12 trillion. It was 8.97 trillion in the same period in FY19.</div>
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	Government revenues averaged Rs 3.09 trillion from 1997 until 2019, touching an all-time high of Rs 16.66 trillion in March 2019.</div>
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Page 21 - Latest Updates on Capital Expenditure

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Govt capex to rise 25% to Rs 3.9 lakh crore by FY20