Plan and non-plan expenditure
Also called: Plan expenditure, non-plan expenditure · Topic: Government Budget, Fiscal Policy and FRBM · NCERT: Class 12, Ch 5 "Government Budget and the Economy"
Meaning
This was the old way of dividing government spending in the budget:
- Plan expenditure paid for central Five-Year Plan schemes and central help for state and UT plans.
- Non-plan expenditure covered interest, defence, subsidies, salaries and pensions.
The split was abolished from 2017-18, on the recommendation of the Rangarajan Committee (2011). Spending is now shown as the Centre's own expenditure vs transfers to states.
Example
Under the old split, the salaries of teachers and doctors were non-plan spending. This labelled them as "wasteful". So education and health suffered, even though salaries are their main cost. The split also pushed governments to start new schemes while neglecting the upkeep of existing assets.
Don't confuse with
- Revenue and capital expenditure: this split is still in use. It depends on whether spending creates assets or reduces liabilities, not on whether it is linked to a Plan.
Related concepts
- Revenue expenditure
- Capital expenditure
- Committed expenditure
- Interest payments
- Effective capital expenditure
- Social sector expenditure
- Welfare expenditure
- Wagner's law
- Peacock-Wiseman hypothesis