Online Courses (English)
This just in:

State PCS

Daily Updates


Scheme for Special Assistance to States for Capital Expenditure

  • 14 Dec 2020
  • 4 min read

Why in News

All the States except Tamil Nadu have availed benefits of the scheme for “Special Assistance to States for Capital Expenditure”.

Key Points

  • Background: As part of the Aatmanirbhar Bharat Package, the government had announced that the Centre will offer Rs. 12,000 crore special interest-free 50-year loan to states, exclusively for capital expenditure.
  • Aim: To boost capital expenditure by the State governments which are facing a difficult financial environment this year due to the shortfall in tax revenue arising from the Covid-19 pandemic.
  • Three Parts:
    • Part–I of the scheme covers the north-eastern region (Rs. 200 crores).
    • Part-II is for all other States (Rs. 7500 crores).
    • Part-III of the scheme is aimed at pushing various citizen-centric reforms in the States.
      • Under this Part, an amount of Rs. 2000 crores is earmarked.
      • This amount will be available only to those States which carry out at least three out of the four reforms specified by the Ministry of Finance on the reform-linked additional borrowing permissions.
      • Four Reforms: One nation one ration card, ease of doing business, urban local body/ utility reform and power sector reforms.
  • Status:
    • The Ministry of Finance has approved Rs. 9,879.61 crore worth of capital expenditure proposals of 27 States.
      • Of this, Rs. 4,939.81 crore has been released as the first instalment.
    • The capital expenditure projects have been approved in diverse sectors such as health, rural development, water supply, irrigation, power, transport, education, urban development.

Capital Expenditure

  • Meaning:
    • Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc.
    • It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividend in future.
    • Along with the creation of assets, repayment of loan is also capital expenditure, as it reduces liability.
    • Capital spending is associated with investment or development spending, where expenditure has benefits extending years into the future.
  • Significance:
    • Capital expenditure, which leads to the creation of assets are long-term in nature and allow the economy to generate revenue for many years by adding or improving production facilities and boosting operational efficiency.
    • It also increases labour participation, takes stock of the economy and raises its capacity to produce more in future.
  • Different from Revenue Expenditure:
    • Unlike capital expenditure, which creates assets for the future, revenue expenditure is one that neither creates assets nor reduces any liability of the government.
    • Salaries of employees, interest payment on past debt, subsidies, pension, etc, fall under the category of revenue expenditure. It is recurring in nature.

Source: PIB

SMS Alerts

Please login or register to view note list


Please login or register to list article as bookmarked


Please login or register to make your note


Please login or register to list article as progressed


Please login or register to list article as bookmarked