2.1.2. Capital Account

Capital Account is an account of the assets as well as liabilities of the central government, which takes into consideration changes in capital. It consists of the capital receipts and capital expenditure of the government

Capital receipts - All those receipts of the government which create liability or reduce financial assets are termed as capital receipts. It can be classified into two categories –

♤ Debt capital receipts – It mainly includes borrowings and other liabilities.

o Borrowings or public debt – Money raised on the security of consolidated fund of India and repayable out of it. It includes:

 Borrowing within the country, that is, loans raised from the public (market borrowings), borrowings from RBI and other financial institutions through sale of treasury bills.

 Borrowing outside the country , that is loans received from foreign governments and international organisations

o Other liabilities – These are money not directly borrowed from people but is available for the government’s expenditure purpose which government is liable to pay back. It includes money kept in public account of India which includes small savings (Post-Office Savings Accounts, National Savings Certificates, etc), provident funds.

♤ Non-debt capital receipts – It includes recoveries of loans granted by the central government and net receipts obtained from the sale of shares in Public Sector Undertakings (PSUs) (This is referred to as PSU disinvestment).

Capital Expenditure: It includes expenditures that create permanent assets and yield periodical income. This includes expenditure on the acquisition of land, building, machinery, equipment, investment in shares, and loans and advances by the central government to State and Union Territory governments, PSUs and other parties. Capital expenditure was also categorised as plan and non-plan in the budget documents. Plan capital expenditure, like its revenue counterpart related to central plan and central assistance for state and union territory plans. Non-plan capital expenditure covered various general, social and economic services provided by the government.