In order to link expenditure to the outcome more efficiently, the Narendra Modi government is now looking to do away with the practice of plan and non-plan expenditure classification in the budget and replacing it with capital and revenue spending.
Union finance Secretary Ratan Watal, at a meeting with his state counterparts said “In the backdrop of the abolition of Planning Commission and setting up of NITI Aayog, the classification of expenditure as plan and non-plan is in the way of losing its relevance.”
Watal further said that the classification will provide linking expenditure to outcome and better public expenditure management. Simplification of accounting heads and routing of heads of expenditure as revenue and capital could reflect the direction of public expenditure in a better way and said that the government has already started deliberations to move towards this.
He further said that the classification may continue for some time as there is a time left for the 12th Plan (2012-17), but perhaps capital and revenue expenditure is something which could also be looked at the state level. This will give the right direction in simplification of accounts and also how we focus on expenditure.
Earlier in 2011, the committee headed by C Rangarajan had proposed that the distinction between plan and non-plan expenditure be abolished for both the Centre and the states.