Should revenue and capital account be shown separately in the union budget?

Abstract

Should India retain the distinction between revenue and capital classification in its Budget format? There is a constitutional provision for distinguishing between the two expenditures, revenue and capital, and various committees appointed by the Government of India have expressed their opinion to retain distinct classification. International experience does not suggest that distinction of expenditure is an absolute necessity. In fact, many advanced countries that were earlier in the emerging/developing stages maintained a distinction between revenue and capital account to allow for better resource allocation. Some of these countries continue to maintain the distinction while others have discontinued with the practice of having separate classification. The distinction between revenue and capital budget helps in providing transparency in the amount that is being borrowed by the Government. As different departments of the Government are involved in receipts and expenditure, a clear demarcation helps in independent estimation of different variables in the Budget.