Difference between Plan and Non-plan Expenditure.

We know that since First April 1951, India has adopted the path of planning (Five-Year Plans) to achieve its rapid economic development. So far ten Five-Year Plans have been implemented and presently Eleventh Plan (2012-2017) is in operation with effect from First April 2007. In the light of these Plans, government expenditure is classified into plan expenditure and non-plan expenditure on the basis of whether or not it arises due to plan proposals.
(i)    Plan Expenditure. Plan Expenditure refers to the estimated expenditure which is provided in the budget to be incurred during the year on implementing various projects and programmes included in the plan.
Provision of such expenditure in the budget is called Plan Expenditure. Expressed alternatively 'plan expenditure is that public expenditure which represents current development and investment outlays (expenditure) that arise due to proposals in the current plan'. Such expenditure is incurred on financing the central plan relating to expenditure on (i) construction of roads and bridges, (ii) generation of electricity, (iii) irrigation and rural development, and (iv) science, technology and environment, etc. It includes both revenue expenditure and capital expenditure. Again the assistance given by the Central Government for the plans of States and Union Territories (U.T.) is also a part of plan expenditure. Plan expenditure is further sub-classified into Revenue Expenditure and Capital Expenditure which along with their components are shown in the preceding chart.
(ii)    Non-plan Expenditure. This refers to the estimated expenditure provided in the budget for spending during the year on routine functioning of the government. Non-plan expenditure is all expenditure other than plan expenditure. Such an expenditure is a must for every country, planning or no planning. For instance, no government can escape from its basic function of protecting the lives and properties of the people and protecting the country from foreign invasions. For this, government has to spend on police, judiciary, military, etc. Similarly, government has to incur expenditure on normal running of government departments and on providing economic and social services. In short, Expenditure other than plan expenditure related to current Five-Year Plan is treated as non-plan expenditure. Its components are shown in the preceding chart.