With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure? 1. Defence expenditure 2. Interest payments 3. Salaries and pensions 4. Subsidies Select the correct answer using the code given below.
Contents12
- A1 only
- B2 and 3 only
- C1, 2, 3 and 4
- DNone
Show answer
Answer: (C) 1, 2, 3 and 4
In the old budget classification (before 2017 when Plan/Non-Plan distinction was abolished), Non-Plan Expenditure covered all recurring, committed spending that the government must pay regardless of development plans:
(1) Defence expenditure — salaries, equipment, operations.
(2) Interest payments — on government borrowings.
(3) Salaries and pensions — of government employees.
(4) Subsidies — food, fertilizer, fuel.
All four are correct. Think of Non-Plan as 'maintenance spending' — the government has no choice but to pay these.
Plan Expenditure was for new development projects under Five-Year Plans.
(Ref: NCERT Economics, Uma Kapila)
Non-Plan Expenditure included all mandatory, recurring costs like defense, interest payments, salaries, pensions, and subsidies that government must pay regardless of development plans.
The Plan/Non-Plan budget classification system was abolished in 2017-18 and replaced with Revenue and Capital Expenditure categories, making this a legacy concept that UPSC still tests from older frameworks.
Plan vs Non-Plan Expenditure Classification
Indian Economy Non-Plan Expenditure Defence expenditure Interest payments Salaries and pensions Subsidies
Plan vs Non-Plan Expenditure: Old Budget Classification (Pre-2017)
Non-Plan Expenditure includes all committed, recurring government spending
Plan Expenditure was for new development projects under Five-Year Plans
Classification abolished in 2017 - replaced by Revenue vs Capital
Defence, interest, salaries, pensions, subsidies were all Non-Plan
What Was This System?
Before 2017, India's Union Budget divided expenditure into Plan and Non-Plan categories. This system linked spending to the Five-Year Plan framework - Plan expenditure funded new development projects, while Non-Plan covered all unavoidable, recurring costs.
Plan vs Non-Plan Classification
Type | Definition | Examples | Nature |
|---|---|---|---|
Plan Expenditure | New development projects under Five-Year Plans | New roads, dams, schools, hospitals | Discretionary, project-based |
Non-Plan Expenditure | Committed, recurring government spending | Salaries, interest, defence, subsidies | Mandatory, maintenance spending |
What Made Expenditure 'Non-Plan'
Committed obligations - government had no choice but to pay
Recurring nature - needed every year regardless of development plans
Maintenance spending - keeping existing systems running
Constitutional/legal requirements - salaries, pensions, debt servicing
Why This Question Tests Memory
This 2014 question required knowing that all four items (defence, interest, salaries, subsidies) fell under Non-Plan. The trap was thinking some items like subsidies might be Plan expenditure because they support development goals.
Trap: Subsidies seem developmental but were Non-Plan (recurring commitment)
Trap: Defence expenditure includes both salaries and equipment - all Non-Plan
Confusion: Food subsidies vs food production schemes - subsidy payments were Non-Plan
Remember: All four options in this question were Non-Plan expenditure
Current Budget Classification (Post-2017)
Indian Economy
Current Budget Classification: Revenue vs Capital Expenditure
Plan/Non-Plan classification abolished in 2017 by Modi government
Replaced with Revenue vs Capital expenditure classification
Revenue expenditure does not create assets (salaries, interest, subsidies)
Capital expenditure creates assets or reduces liabilities
Why The Change?
The Plan vs Non-Plan system became outdated after the NITI Aayog replaced the Planning Commission in 2015. The new classification focuses on the economic nature of spending rather than planning categories.
Old vs New Classification
Old System (Pre-2017) | New System (Post-2017) | Focus |
|---|---|---|
Plan Expenditure | Capital Expenditure | Asset creation, infrastructure |
Non-Plan Expenditure | Revenue Expenditure | Day-to-day operations, maintenance |
Where Old Non-Plan Items Went
Salaries & pensions → Revenue expenditure (no assets created)
Interest payments → Revenue expenditure (debt servicing)
Subsidies → Revenue expenditure (transfer payments)
Defence equipment → Capital expenditure (creates military assets)
Defence salaries → Revenue expenditure (operational costs)
Post-2017 questions use Revenue/Capital, not Plan/Non-Plan classification
Defence spending now split: equipment (Capital), salaries (Revenue)
UPSC may test knowledge of when the classification changed (2017)
Components of Non-Plan Expenditure
Indian Economy Defence expenditure Interest payments Salaries and pensions Subsidies
Major Components of Non-Plan Expenditure (Historical Classification)
Interest payments were the largest Non-Plan expenditure component
Defence expenditure covered salaries, pensions, and equipment costs
Subsidies included food, fertilizer, and petroleum subsidies
Salaries & pensions of central government employees
Non-Plan Expenditure Components
Component | What It Included | Why Non-Plan | Share of Budget |
|---|---|---|---|
Interest Payments | Interest on government borrowings, bonds | Legal obligation, cannot be avoided | Largest component |
Defence Expenditure | Armed forces salaries, equipment, operations | National security commitment | ~15-20% of total |
Salaries & Pensions | Central govt employees, retired personnel | Contractual obligations | Significant portion |
Subsidies | Food (PDS), fertilizer, LPG, kerosene | Policy commitments to citizens | ~10-15% of total |
Key Features of Each Component
Interest payments - servicing public debt, cannot be reduced without default
Defence expenditure - includes both Revenue (salaries) and Capital (weapons) components
Subsidies - direct transfers to reduce citizen costs for essentials
Administrative costs - running the government machinery
All four options in the original question were Non-Plan - no elimination possible
Don't confuse food subsidies (Non-Plan) with agricultural development (Plan)
Defence research was Plan, but defence operations were Non-Plan