CAPF AC 2022 Q109: Indian Economy – Fiscal Policy & Budget
- (a) non-tax revenue
- (b) revenue receipts
- (c) capital receipts
- (d) tax revenue
Answer: (c) capital receipts
Explanation
Where disinvestment money goes in the budget
How to think: use the test for a capital receipt.
A receipt is a capital receipt if it either creates a liability or reduces an asset.
When the government sells its shares in a public sector company, its assets fall.
| Receipt | Type | Why |
|---|---|---|
| Income tax, GST | Revenue receipt (tax) | No liability, no loss of assets |
| Interest, dividends, fees | Revenue receipt (non-tax) | No liability, no loss of assets |
| Disinvestment proceeds | Capital receipt, non-debt | Reduces the government's assets |
| Recovery of loans | Capital receipt, non-debt | Reduces assets |
| Borrowings | Capital receipt, debt | Creates a liability |
Who handles it: the Department of Investment and Public Asset Management (DIPAM) in the Ministry of Finance.
Answer: (c) capital receipts.
Why each option is right or wrong
- (a) Incorrect. Non-tax revenue covers interest, dividends and fees, not sale of assets.
- (b) Incorrect. Revenue receipts neither reduce assets nor create liabilities.
- (c) CORRECT. Disinvestment reduces assets, so its proceeds are capital receipts.
- (d) Incorrect. Selling shares is not a tax.
Key point
Capital receipts: borrowings (debt-creating), recovery of loans and disinvestment (non-debt-creating). Revenue receipts: tax and non-tax. Dividends from PSUs are non-tax revenue; sale of PSU shares is a capital receipt.
Remember
Disinvestment = non-debt capital receipt.
Common mistakes
- Mixing up dividends from PSUs (revenue) with sale of PSU shares (capital).
- Thinking every receipt that is not a loan must be a revenue receipt.
- Forgetting the two-part test: liability created or asset reduced.
Exam tip
Educated guess: options (a), (b) and (d) are all kinds of revenue receipt. Three options of the same family cannot each be right, so the different one, capital receipts, is the answer.
Sources
- NCERT Class XII Economics — Introductory Macroeconomics, Chapter 5: Government Budget and the Economy
- Union Budget — Receipt Budget: Non-debt Capital Receipts (disinvestment)