Which of the following is/are included in the capital budget of the Government of India?
- 1.Expenditure on acquisition of assets like roads, buildings, machinery, etc.
- 2.Loans received from foreign governments
- 3.Loans and advances granted to the States and Union Territories
Select the correct answer using the code given below.
Answer & explanation
Answer: (d) 1, 2 and 3
The capital budget has two sides: capital receipts (borrowings, including loans from foreign governments, and recoveries of loans) and capital payments (spending on assets, investments, and loans given to States, UTs and others). Item 2 is a capital receipt, while items 1 and 3 are capital payments, so all three belong to the capital budget.
- ✓ 1. Spending that creates assets such as land, buildings and machinery is capital expenditure, a part of capital payments.
- ✓ 2. Loans received from foreign governments create a liability for the government, so they are capital receipts.
- ✓ 3. Loans and advances given by the Centre to State and UT governments create a financial asset (a claim on repayment), so they are capital payments.
Remember · Capital budget = capital receipts (loans taken, recoveries, disinvestment) + capital payments (asset creation, investments, loans given). Test: does it create a liability or change assets?
📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter)
Sources
- Ministry of Finance, Union Budget: Key to Budget Documents, para (v) ↗ “Capital receipts and capital payments together constitute the Capital Budget. The capital receipts are loans raised by the Government (these are termed as market loans), borrowings by the Government through the sale of Treasury Bills, the loans received from foreign Governments and bodies … Capital payments consist of capital expenditure on acquisition of assets like land, buildings, machinery, equipment, as also investments in shares, etc., and loans and advances granted by the Central Government to the State and the Union Territory Governments”
- NCERT Class 12 · Introductory Macroeconomics, Chapter 5 “All those receipts of the government which create liability or reduce financial assets are termed as capital receipts.”
Question and answer: UPSC's official GS Paper I (2016, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·