💥UPSC Trap | Conceptual Understanding | Indian Economy

📚If subsidy helps production…
and increases future output…

Then WHY is “subsidy” called Revenue Expenditure?

Shouldn’t it be Capital Expenditure ???

Let’s simplify 🧵👇

1. First instinct which comes to our mind.
👉 Subsidy → more production → future benefit

Sounds like asset creation, right?

💥But here’s the catch 👇

2. Govt classification is NOT based on future benefit

👉 It is based on:
Does govt create an asset or not?

3. What happens in subsidy?

👉 Govt gives money to:
- Farmers
- Firms
- Consumers

👉 But does govt OWN anything? NO.

No land, no factory, no asset

4. So even if economy benefits…

👉 Govt books show:
No asset creation

👉 Hence → Revenue Expenditure

5. Now, Compare this 👇

Govt builds highway → owns it → Capital Expenditure

Govt gives subsidy → no ownership → Revenue Expenditure

🎯 therefore,
“Benefit to economy is not always Asset for government”

That’s why subsidy = Revenue Expenditure

#UPSC #Economy #Budgeting #FiscalPolicy #UPSCPrelims