With reference to Revenue Expenditure and Revenue Deficit in the Indian context, consider the following statements: 1. Revenue expenditure includes both social sector spending and defence expenditure, but does not create productive assets. 2. Revenue deficit indicates that the government’s revenue receipts are higher than its revenue expenditures. 3. A revenue surplus implies the government can allocate excess revenue to capital investments, provided the surplus is managed judiciously. Which of the statements given above is/are correct? |ForumIAS

[A] 1 and 2 only

[B] 1 and 3 only

[C] 2 and 3 only

[D] 1, 2 and 3

Answer: B

Notes:

Explanation:

Revenue expenditure includes items like interest payments, subsidies, defence, salaries, social sector spending (education, health, etc.), and does not result in asset creation — it is of consumptive
Revenue deficit means the government’s revenue expenditure exceeds its revenue receipts, not the other way around.
A revenue surplus implies that the government has earned more than it spent from its revenue budget and can use the surplus for capital expenditure (e.g., infrastructure), but it depends on whether the policies to generate that surplus were sound and non-distortive.

Source- TMH Indian Economy by Ramesh Singh

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