In 2019-20 Government has so far spent 77% more than its income!

Published: December 26, 2019 at 1:49 pm

Last Updated on December 29, 2021 at 5:17 pm

The consolidated monthly Account of the Union Government of India up to the month of October 2019 for the Financial Year 2019-20 was recently released. The total spending is Rs. 16,54,905 crores,  a good 77% more than its total revenue! What are the different heads of income and expenditure for the government? An explanation.

The Government of India has received Rs.9,34,460 crore up to Oct 2019. Out of this, 73% is from tax revenue; 24% non-tax revenue; 1% from recovery of loans; 2% from disinvestment proceeds.  The total expenditure incurred is a whopping 177% of the total revenue.

Out of the total expenditure, a good 20% goes to service debt via interest payments. Another 16% is due to major subsidies.  Unless the revenue-expenditure gap decreases, the infrastructure of the country cannot grow, our tax burden will remain high. We need a gradual but steady transition from subsidy to opportunity. The former will ensure the poor remain poor.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

About the author: Anjesh Bharatiya is a 30+ taxman by profession and a Chemical Engineer by education. He has been an investor in the stock market since age 15! He likes to write about personal finance, stock markets, government policies, taxation, philosophy and football.

Expenditure statement of the government of India in the last four financial years
Expenditure statement of the government of India. Source:

These are the annual and monthly accounts of the Government of India. Just like any listed company, the Government of India also publishes its accounts from time to time. For understanding the state of our economy, understanding where the Government gets its money from and where it spends it is very important. In this article, we will try to understand some of the important terms that occur in these statements.

Budgeted estimates (BE)

These are the budget allocations announced at the beginning of each financial year.  They comprise of the estimated receipts and expenditure of the Government that the Finance Minister (FM) brings out in the Annual Budget every year in the Parliament.

Revised Estimates (RE)

These are the mid-year estimates of projected amounts of receipts and expenditure until the end of the financial year taking into account the trends of the Government’s income & expenses for the year.

Revenue Receipts

All receipts of the Government that are routine & recurring in nature and that do not involve the sale of any asset are called revenue receipts. They include the following:

Tax Revenue: As the name suggests, these are the net tax receipts of the Government. This head includes the proceeds of both direct taxes (Income Tax, Corporate Tax etc.) and indirect taxes (GST, customs duty etc.) after deducting the refunds paid.

Non-Tax Revenue: This head includes interest payments (received on loans given by the Centre to states, railways and others) and dividends and profits received from Public Sector Enterprises. Some services provided by the Government like railways, police, medical services etc. also earn revenue for the Government.

Capital Receipts

Capital receipts are generated when the Government liquidates an asset (disinvestment) or recovers loans given to states and the like. Also called non-debt capital receipts, they are non-recurring and non-routine in nature. For example, the Government announces a disinvestment target every year during the Budget in which it outlines the Public Sector Enterprises in which it intends to sell a stake and the estimated proceeds it hopes to generate from the exercise.

Devolution to states

Based on a formula prescribed the Finance Commission (a constitutional body formed every five years), the Centre devolves a fixed percentage of its tax revenue to the states. The 14th Finance Commission recommended increasing the tax devolution of the divisible pool to states to 42% (from 32% earlier) for the years 2015 to 2020, the single largest increase ever recommended.

Revenue Expenditure

Expenses like salaries, subsidies and interest payments on loans which are regular and recurring in nature form the revenue expenditure of the Government. A major contributor to this head is subsidies that Government provides in various sectors & products like fertilizers, LPG, food etc.

Capital Expenditure

Expenditure made for acquiring and creating assets like land, buildings, equipment (including defence) etc. forms part of capital expenditure. It also includes the Government’s investments and loans given that are expected to yield future income. If you observe closely, Government’s capital expenditure as a percentage of total expenditure has been showing a downward trend which reflects the fact that the less productive revenue expenditure has been eating into the potential asset creation funds of the Government.

Revenue Deficit

The excess of expenditure over receipts under the revenue head is called the revenue deficit. That this deficit exists reflects that the Government does not generate enough revenue receipts to pay for its revenue expenditure. In an ideal world, this should be a surplus or at least be zero.

Fiscal Deficit

This is the term we most often hear in the media. It is simply the shortfall of the Government’s total income against its total expenditure. It is usually financed through borrowing, either from the RBI or from the capital market by issuing instruments like treasury bills and bonds. Since the capital markets have limited funding available, excessive Government borrowing from the market not only weakens the financial health of the country but also crowds out the market for private-sector borrowing. In Budget 2019, the FM had proposed issuing overseas bonds to finance its fiscal deficit by tapping the global markets. That plan, however, had to be put on the backburner mostly because of the domestic slowdown and perceived forex risks with a weakening rupee.

Primary Deficit

            It is simply the Fiscal Deficit minus interest payments.

Final word

So there we have it. The above terminologies will help you in understanding the Government’s accounts in a better manner. An understanding which is important if you are to make sense of the economic condition of the Government and by extension, the country. So, the next time the Budget rolls around in February 2020, try to cut through the rhetoric in the Parliament and have a glance at the Government’s accounts to find out the real state of the union.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)