Plan Expenditure – any expenditure that is incurred on programmes which are detailed under the current (Five Year) Plan of the centre or centre’s advances to state for their plans is called plan expenditure. Provision of such expenditure in the budget is called Plan Expenditure. Plan expenditure is further sub-classified into Revenue Expenditure and Capital Expenditure
Such plans ware developed by the erstwhile Planning Commission after consulting individual ministries.
Each Plan specifies programs that ministries will fund and develop over the next five years (like Mid-Day Meal scheme and the Sarva Shiksha Abhiyan)
Plan expenditure can have both revenue and capital components.
For instance, under the Sarva Shiksha Abhiyan, salaries of teachers could be classified as revenue expenditure, while expenditure on the building a school might be classified as capital expenditure.
Non-Plan Expenditure – this refers to the estimated expenditure provided in the budget for spending during the year on routine functioning of the government. Non- Plan expenditure is all expenditure other than plan expenditure of the govt.
It includes interest payments on government debt, expenditure on organs of the state such as the judiciary and the police and even expenditure on the maintenance of existing government establishments such as schools and hospitals.
Non-plan expenditure too, has revenue and capital components.
Rangarajan Committee Report
Recommended removal of the distinction between plan and non-plan expenditure due to vagueness of the terms and the rigid categorization of expenditure
As 5-years plans and its formulating body (Planning Commission) were taken down, the government during Budget 2017 did away the distinction between plan and non-plan expenditure.
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