Definition
Revenue vs Capital Expenditure
Revenue expenditure covers the government's recurring running costs, while capital expenditure creates lasting assets or reduces liabilities.
Every rupee the government spends is classified as either revenue or capital. Revenue expenditure — salaries, pensions, interest, subsidies — keeps the machinery running but creates no new asset. Capital expenditure (capex) builds roads, railways, ports and bridges, or repays debt, and is seen as more growth-friendly because it has a higher multiplier.
Analysts judge Budget quality partly by the mix: a higher share of capex within total spending is generally viewed favourably. India's recent Budgets have emphasised a capex push, sharply raising the capital outlay to crowd in private investment and create durable infrastructure.
Related terms
- Revenue DeficitThe revenue deficit is the excess of the government's revenue expenditure over its revenue receipts, indicating that day-to-day running costs are being met partly through borrowing.
- Capex PushA capex push is a deliberate budgetary strategy of sharply increasing government capital expenditure on infrastructure to spur growth and attract private investment.
- Capital OutlayCapital outlay is the portion of government spending used directly to acquire or build physical and financial assets, the core of capital expenditure.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.