The expenditure of the Central government is of two types: Revenue Expenditure and Capital Expenditure.
I. Revenue Expenditure: The expenditure incurred by the Central government from the sources of revenue income is called Revenue Expenditure. This expenditure is used for various financial and social services, defence, administration, interest payment, grants to states and other purposes.
Revenue expenditure is classified into two groups called Planned Expenditure and Non-planned Expenditure.
A : Planned Expenditure : The expenditure incurred by the government towards financial and social services, nation-building exercises and developmental works is called Planned Expenditure. This is the expenditure incurred by the government towards developmental activities under various plans. Besides these, this expenditure covers the plans of states as well as centrallyadministered territories.
Under the Central Planned Expenditure, the government spends money on three types of services and development. They are:
1. Financial services – Agriculture and agriculture-related activities, industry, communication, fuel, science and technology, rural development etc.
2. Social services – Education, health, hygiene, family welfare, drinking water supply, housing, social welfare etc. Public Expenditure
3. General services – The expenditure incurred on maintenance of peace, law and order.
B : Non-planned Expenditure : With the exception of developmental activities, expenditure incurred on administration, defence, interest payment and other heads is called Non-planned expenditure. The major heads of non-plan expenditure are civil administration, defence, interest payment, allocations to states and various subsides Etc,.