With reference to Union Budget, consider the following statements:
1. Non-plan expenditure is the money spent on non-productive areas.
2. A major part of the Non-Plan Expenditure is obligatory in nature.
3. The classification of plan and non-plan expenditure in the Union Budget has been abolished now.
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Explanation Statement 1 is not correct: While it’s a common perception that Non-Plan Expenditure (NPE) is “non-productive,” this is not an accurate classification. Non-Plan Expenditure (NPE) includes essential functions like defence services, subsidies, pensions, interest payments, and administrative expenses,which are vital for the functioning of the state. These expenditures may not directly create capital assets, but they are crucial for maintaining law, order, national security, and governance.
Statement 2 is correct: A major part of the Non-Plan Expenditure is obligatory in nature, like interest payments, pensions, statutory transfers to States and Union Territories governments. The biggest items of Non-Plan Expenditure were interest payments and debt servicing, defence expenditure and subsidies.
Statement 3 is correct: The classification of plan and non-plan expenditure in the Union Budget has been abolished now. The expenditures of the Government are classified as Capital and Revenue spending.
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