Revenue expenditure and capital expenditure are the two types of ‘Public Expenditure‘ which is incurred by the Government on various activities for the welfare of the people and also for the economic development of the country.
What is Revenue Expenditure?
Revenue expenditure is the expenditure incurred by the Government to meet its day-to-day needs, like civil administration, public health, education, maintenance of Government machinery, defence forces, etc.
This expenditure is of a recurring type which is incurred year after year, and also does not impact the asset-liability status of the Government.
Examples: Interest payments, major subsidies, defence expenses, grants to States, salaries and pensions of government employees, revenue expenditure on various welfare schemes, etc.
What is Capital Expenditure?
Expenditure that creates permanent assets and yields regular income is known as capital expenditure. It impacts the asset-liability status of the Government as it results in the acquisition of a tangible or intangible asset or payment of liabilities.
Examples: Repayment of Loans, an extension of fresh loans to the States, PSUs and Foreign Countries, Expense on Infrastructure Projects like building highways, railways, multipurpose dams, etc.