| Which of the following are components of 'revenue expenditure'? |
| 1. Interest payments on banks |
| 2. Salaries and pensions of government expenses |
| 3. Subsidies |
| 4. Grants to foreign countries |
| 5. Loans to Indian states |
| Select the correct answer using the codes given below: |
A) 1, 2 and 3 only
B) 2, 3 and 5 only
C) 1, 4 and 5 only
D) 1, 2, 3 and 4 only
Correct Answer: D
Solution :
Major components of 'revenue expenditure' are: 1) The interest paid by the Government of India on all the internal and external loans does not produce any assets, so it is revenue expenditure. 2) The salaries and Pension paid by the Government to Government employees is needed to run the Government's business. It is revenue expenditure. 3) The subsidies forwarded by the government to all sectors do not produce any productive asset, so it is revenue expenditure. 4) The defense expenditures which are needed for smooth operation of the standing armed forces is a revenue expenditure. However, purchase of equipments produces assets, so that would be a Capital expenditure. 5) The postal expenditures and deficits are Revenue expenditures. 6) The money spent of maintaining the law and order situation of the country is also revenue expenditures. 7) The money spent on various social services such as public health, education, poverty alleviation, scholarships, etc. all revenue expenditures. 8) The grants given by the Government of India to states and other countries is Revenue expenditures.
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