Which of the following is/are included in the capital budget of the Government of India? 1. Expenditure on acquisition of assets like roads, buildings, machinery, etc. 2. Loans received from foreign governments 3. Loan and advances granted to the States and Union Territories Select the correct answer using the codes given below:

The capital budget records transactions that create or reduce government assets and liabilities. It has two sides: capital receipts and capital expenditure. All three statements fall on one side or the other, so the answer is D.

Statement 1 is capital expenditure. Buying roads, buildings and machinery creates physical assets, so it sits on the expenditure side of the capital account.

Statement 2 is a capital receipt. Loans taken from foreign governments create a liability for the government, so they are borrowings and enter the capital receipts side.

Statement 3 is also capital expenditure. Loans and advances to States and Union Territories are assets of the Centre because they carry a claim for repayment, so they are shown as capital outlay.

Core concept: the revenue budget covers transactions that neither create nor extinguish assets or liabilities, while the capital budget covers those that do. Fiscal deficit and debt sustainability questions in Mains draw directly on this split.

Trap: candidates assume only money spent on physical assets counts as capital and drop statements 2 and 3. Remember that loans given and loans taken both belong to the capital budget.