Ending plan & non-plan expenditure: What does it mean?

Moneycontrol BureauIn a Cabinet meet on Wednesday, the government not only did away with a separate Rail Budget, but has also removed the distinction between planned and non-planned expenditure from the Union Budget.The government now plans to switch to capital and revenue spending classifications. This will help create a clear and effective link between the government’s earnings, spending and outcome. Revenue expenditure includes interest payments, subsidies, wages to government employees, pensions, social services and so on. Any expenditure that does not lead to formation of any asset or liability for the government will fall under this category. Capital expenditure, on the other hand, are the ones that create some liability/asset for the government. These include loans to public enterprises, loans to States, Union Territories and foreign governments and acquisition of valuables.The plan to drop plan and non-plan expenditure came after the government had dismantled the Planning Commission. Earlier, the plan expenditure was estimated after discussions with all ministries and the Planning Commission. In the earlier system, more emphasis was on planned expenditure, but now focus will be on all expenditures of the government, giving a more overall picture. Since there is no Planning Commission, there is no need to have separate plan expenditure in the Budget, says former Finance Minister Yashwant Sinha. Sinha further says that government should consider recommendations of the Rangarajan committee now also and should clearly reflect the investments by the government. This is not the first time that suggestion to separate committee has come forth for the separation of expenditure. In 2011, a committee headed by C Rangarajan had proposed to remove distinction between the plan and non-plan expenditures for both the Centre and states.