Fiscal-policy / Fiscal Policy / Capital Receipt and Capital Expenditure..
Capital Receipt and Capital Expenditure..
Capital Account Receipts
Capital account receipts involve transactions that contribute to the capital assets and liabilities of the government. Here are the key components of capital account receipts:
- Recoveries of Loans and Advances:
- Involves the repayment of loans and advances previously provided by the Union Government to States, Union Territories (UTs), and Public Sector Units (PSUs).
- Receipts from Sale of Assets:
- Includes revenue generated from the sale of assets, such as public sector units and their shares. This often relates to privatization and disinvestment initiatives.
- Borrowings:
- Fresh borrowings can occur both domestically and from overseas sources. This includes the government raising funds through debt instruments.
Note: While borrowings are a form of capital receipt, they represent a liability for the government as they need to be repaid.
- Special Cases:
- In certain cases, one-time revenues from specific events, like the 3G spectrum auction and broadband wireless spectrum auction, may be classified as capital receipts. These events involve the sale of valuable assets, even though the revenue is received once.
Capital Account Expenditure
Capital account expenditure is associated with investments in assets, particularly those that contribute to the creation of physical and social infrastructure. Here are the main components:
- Loans Made:
- Involves providing loans to States, UTs, and PSUs for various development purposes.
- Asset Creation:
- Expenditure directed towards the creation of assets in infrastructure and social sectors. This includes investments in projects that contribute to long-term economic development.
- Loans Repaid:
- Repayment of loans that were previously provided. This represents an outflow of funds from the government's capital account.
Key Points
- Capital Receipts: Include recoveries of loans, receipts from the sale of assets, and borrowings.
- Borrowings: Represent a significant portion of capital receipts but create a liability for the government.
- One-Time Revenues: Certain events, like spectrum auctions, may generate one-time revenues classified as capital receipts.
- Capital Expenditure: Involves loans made, asset creation, and repayment of loans.
Understanding capital account receipts and expenditure is crucial for assessing the government's investment in long-term development projects and its ability to manage capital liabilities.
