CDS (II) 2024 General Knowledge · Question 105 of 120

Correct — B, Interest Payments. Revenue expenditure is spending that neither creates an asset nor reduces a liability — salaries, pensions, subsidies, grants and, above all, the interest the Union pays on its accumulated debt. In the Union Budget for 2024-25, revenue expenditure was budgeted at about ₹37.09 lakh crore, of which interest payments alone accounted for about ₹11.63 lakh crore, close to a third of the total and roughly 24 per cent of all Union spending. Nothing else comes near it. The Ministry of Defence had the largest ministry-wise allocation at about ₹6.22 lakh crore, but that number includes capital acquisition and defence pensions, so defence revenue spending is far smaller than the interest bill. This is the structural reason why fiscal consolidation is hard: interest is a committed charge arising from past borrowing, and it crowds out discretionary spending long before any new decision is taken.

• (a)Salaries — Pay and allowances are a large committed item but well below the interest bill; much of the Union's establishment cost also sits inside individual ministry budgets rather than as one head.
• (c)Road Transport and Highways — This ministry's allocation is heavily capital expenditure on building highways — asset creation, which is not revenue expenditure at all — and at about 5.8 per cent of total spending it is far smaller.
• (d)Defence Services — The largest ministry allocation, but a big part of it is capital acquisition and pensions. Measured as revenue expenditure it is well under half the interest bill.

The Union Budget splits spending into revenue expenditure and capital expenditure. Revenue expenditure covers the running of government and the servicing of past commitments; capital expenditure creates assets or repays debt. Interest payments are the single largest revenue item, and they are also the standard denominator for two stress ratios: interest payments as a share of revenue receipts, and the primary deficit, which is the fiscal deficit minus interest payments and shows what the government would borrow if it carried no legacy debt.

The question invites a guess based on visibility. Defence is the loudest number in the budget conversation and the largest ministry allocation, so it is the natural first answer; roads and salaries feel large too. The discipline is to ask which items are revenue expenditure and then which of those is the biggest single head. Once interest is recognised as a committed charge on decades of accumulated borrowing, its size stops being surprising. As of the 2024-25 budget interest payments equalled about 37 per cent of the Union's revenue receipts. Worth flagging: UPSC has not released a key for this paper, and some answer keys in circulation mark (d), because that ministry has the largest allocation of any single ministry. The question asks about revenue expenditure, and on that measure the interest bill is nearly twice as large, so this card takes (b).

• Union Budget 2024-25: revenue expenditure about ₹37.09 lakh crore, of which interest payments about ₹11.63 lakh crore.
• Interest payments were about 24 per cent of total Union expenditure and about 37 per cent of revenue receipts.
• The Ministry of Defence had the largest ministry-wise allocation in 2024-25 at about ₹6.22 lakh crore, or 13 per cent of total expenditure, including capital outlay and pensions.
• Primary deficit = fiscal deficit − interest payments; it was estimated at about 1.4 per cent of GDP in 2024-25.

• Picking the largest ministry allocation when the question asks about the largest item of revenue expenditure.
• Counting the whole defence budget as revenue expenditure, ignoring capital acquisition and pensions.
• Confusing the fiscal deficit with the primary deficit, which is the fiscal deficit net of interest.

As a which-item-is-largest question on the budget, or as a definition item on the deficits and on what counts as revenue expenditure.

No directly related past PYQ was found.

• practice — not a real PYQ

  The primary deficit is defined as

  • (a)fiscal deficit minus interest payments
  • (b)revenue deficit minus grants for capital assets
  • (c)fiscal deficit plus interest payments
  • (d)total expenditure minus total receipts

  Answer(a) fiscal deficit minus interest payments — it shows current borrowing net of the cost of past borrowing.

• practice — not a real PYQ

  Which one of the following is a capital expenditure of the Union Government?

  • (a)Interest payment on public debt
  • (b)Salaries of central government employees
  • (c)Construction of a national highway
  • (d)Food subsidy

  Answer(c) Construction of a national highway — it creates a physical asset; the other three are revenue expenditure.