Budget 2026: What is expenditure budget, what are its key components?

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026-27 on February 1, a key event for markets, businesses, and households for tracking tax changes, spending plans, and economic signals. The Union Budget sets the government’s economic direction for the year ahead. It answers how it plans to grow the economy, support citizens, and manage public finances.

Beyond tax proposals and fiscal targets, the Expenditure Budget tells the real story of how the government plans to spend public money. This document shows exactly where public money will be spent and how policy promises translate into action. From infrastructure and defence to welfare schemes and salaries, the Expenditure Budget reveals the government’s spending blueprint for the year.

What is an expenditure budget?

The Expenditure Budget is a key component of the Union Budget that outlines the government's total spending for the financial year. It provides a ministry-wise, scheme-wise, and purpose-wise break-up of expenditure, ensuring transparency in how public funds are allocated.

Key components of the expenditure budget

Revenue expenditure:

This includes routine and recurring expenses such as salaries, pensions, subsidies, interest payments, and maintenance costs. While essential for day-to-day functioning, revenue expenditure does not create long-term assets.

Capital expenditure:

Capital expenditure focuses on asset creation, such as roads, railways, ports, defence equipment, digital infrastructure, and long-term investments. Higher capital expenditure is seen as growth-oriented because it boosts productivity and job creation.

Plan and non-plan classification (earlier system):

Earlier budgets classified spending into plan and non-plan expenditure. This has now been replaced by a revenue–capital framework, making expenditure analysis more outcome-focused.

Why the expenditure budget matters

The expenditure budget reflects the government’s policy priorities in action. A rise in capital expenditure signals a push for long-term growth, while higher social sector spending indicates a focus on welfare and inclusion. It also reveals trade-offs where spending is increased, where it is cut, and where efficiency is being improved.

Link with Union Budget 2026

In Union Budget 2026, the Expenditure Budget will indicate whether the government is prioritising infrastructure-led growth, social welfare, fiscal consolidation, or a balance of all three. For citizens, investors, and analysts, it is the clearest window into how government policy translates into real spending on the ground.