Union Budget 2020: Understanding the role of Revenue Receipt and Revenue Expenditure

Non-tax Revenue will include receipts from the government’s divestment process which are nothing but the proceeds from the stake sale in various public sector undertakings. Non-tax Revenue will also include the dividend income which the government receives as a shareholder of the various public sector undertakings.

As the name suggests, Revenue Expenditure is also called income statement expenditure. It denotes short-term cost-related assets that are not capitalised. To put it simply, these are the maintenance expenditure which the government makes towards the assets which it owns in order to keep them functioning. These expenditures are recurring in nature and are incurred by the government regularly.

Revenue Expenditure must not create an asset for the government. For example, payment of salaries or pension as it does not create any asset. However, the amount spent on construction of Metro is not Revenue Expenditure as it leads to the creation of an asset.

Revenue Expenditure also must not decrease the liability for the government. For example, repayment of borrowings is not Revenue Expenditure as it leads to a reduction in liability of the government.

The difference between Revenue Receipt and Revenue Expenditure is known as Revenue Deficit. In Union Budget 2018-19, Revenue Receipt was estimated to be at Rs 17.25 lakh crore and Revenue Expenditure was estimated to be at Rs 21 lakh crore which worked out to a Revenue Deficit of Rs 4 lakh crore.

A Revenue Deficit does not denote an actual loss of revenue for the government but it only means a shortfall in revenue from what was expected by the government.