From 2017-18, the Central government expenditure will be classified only as capital and revenue spends, NITI Aayog Vice-Chairman Arvind Panagariya said on Wednesday.
The move is a part of the government’s decision to do away with the classification of Plan and Non-Plan expenditure.
In line with the government’s decision to dismantle the Planning Commission, the new spending classification will come at a time when the Five-Year Plan mechanism will also end. Instead, it will be replaced by a medium to long-term planning system under the NITI Aayog.
The classifications in the Union Budget 2016-17 for Centrally-sponsored schemes have already been changed to “core of the core”, “core” and “optimal”.
Economists have for long argued that Plan and Non-Plan classifications should be done away with and the focus should be on improving the quality of government spending by focussing on the end use of the funds.
In 2010, a panel led by the former Prime Minister’s Economic Advisory Council Chairman C Rangarajan had also suggested doing away with the artificial classification.
Plan expenditure, denotes the more productive use of government resources as investment in various programmes and schemes, but forms a small chunk of the total spending bill. Non-Plan expenditure, on the other hand, is the majority of the government spending and is used for interest payments, subsidies, wages and grants to States.