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UPSC Notes

Government Capital Expenditure (Capex)

PYQs

8

Articles

1

Momentum

21

Phase IFoundation

Background

Overview

Government capex is a primary tool for fiscal policy, directly impacting infrastructure development, job creation, and overall economic growth, making it central to budget analysis and economic planning.

Government capital expenditure refers to the money spent by the government on creating long-term assets such as infrastructure (roads, railways, ports), buildings, machinery, and equipment. It is a crucial component of fiscal policy aimed at boosting economic growth and productivity.

Phase IIStatic core

Facts & tables

Key facts

Asset Creation

Creates productive assets, enhancing long-term growth potential.

Multiplier Effect

Has a higher multiplier effect on the economy compared to revenue expenditure.

Employment Generation

Generates employment directly and indirectly across various sectors.

Counter-cyclical Tool

Often used as a counter-cyclical measure to stimulate demand during economic slowdowns.

Reference table

Static syllabus anchors

TypeReference
Conceptual areaIndian Economy

Reference table

Institutions & roles

BodyRole
Ministry of FinanceFormulates and allocates
Phase IIIExam lens

Prelims angle

Overview

Prelims angle: Conceptual understanding

Prelims angle: Terminology-based question

Quick revision

  • Investment in long-term assets.
  • Key fiscal policy tool.
  • High multiplier effect.
  • Boosts growth and employment.
  • Crucial for infrastructure development.

High-confidence PYQs

2026Conceptual understanding, Definition-based questions

Which one of the following best describes the 'Crowding Out Effect' in the context of fiscal policy ?

EconomyOpen question
2025Conceptual understanding, Application of economic principles

A country’s fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country’s interest liabil...

EconomyOpen question

Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings ...

EconomyOpen question
2025Conceptual understanding, Terminology-based question

A country’s fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country’s interest liabil...

EconomyOpen question

Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings ...

EconomyOpen question
2021Conceptual understanding, Cause and effect relationships

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

EconomyOpen question
2019Conceptual understanding, Multi-statement analysis

In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis? 1. The foreign currency e...

EconomyOpen question
2016Purpose or function of a policy tool, Factual recall

Which one of the following is a purpose of ‘UDAY’, a scheme of the Government?

EconomyOpen question
2015Conceptual understanding, Cause and effect relationships

A decrease in tax to GDP ratio of a country indicates which of the following? 1. Slowing economic growth rates 2. Less equitable distribution of national in...

EconomyOpen question
2013Conceptual understanding, Cause and effect relationships

Which one of the following is likely to be the most inflationary in its effect?

EconomyOpen question

Topic timeline

Indian Economy
Prelims 2013· Conceptual understanding, Cause and effect relationships

Which one of the following is likely to be the most inflationary in its effect?

Open question
Prelims 2015· Conceptual understanding, Cause and effect relationships

A decrease in tax to GDP ratio of a country indicates which of the following? 1. Slowing economic growth rates 2. Less equitable distribution of national in...

Open question
Prelims 2016· Purpose or function of a policy tool, Factual recall

Which one of the following is a purpose of ‘UDAY’, a scheme of the Government?

Open question
Prelims 2019· Conceptual understanding, Multi-statement analysis

In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis? 1. The foreign currency e...

Open question
Prelims 2021· Conceptual understanding, Cause and effect relationships

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

Open question
Prelims 2025· Conceptual understanding, Application of economic principles

A country’s fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country’s interest liabil...

Open question

Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings ...

Open question
Prelims 2025· Conceptual understanding, Terminology-based question

A country’s fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country’s interest liabil...

Open question

Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings ...

Open question
Prelims 2026· Conceptual understanding, Definition-based questions

Which one of the following best describes the 'Crowding Out Effect' in the context of fiscal policy ?

Open question

Temporary respite: On the June 2026 data for the Index of Industrial Production

31 Jul 2026 · Government capital expenditure involves public spending on asset creation like infrastructure, serving as a key fiscal policy instrument to stimulate economic growth, generate employment, and enhance long-term productivity.

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Related topics

Current topic

Government Capital Expenditure (Capex)

Practice writing on this topic

UPSC has asked 8 linked questions on Government Capital Expenditure (Capex) in Mains. Write an answer to one — and get it evaluated.

See Mains PYQsEvaluate an answer

UPSC Prelims PYQs on Government Capital Expenditure (Capex)

Practice official previous year questions asked by UPSC related to this concept.

A country’s fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country’s interest liabil...

2025·Economy
Solve

Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings ...

2025·Economy
Solve

In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis? 1. The foreign currency e...

2019·Economy
Solve

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

2021·Economy
Solve

A decrease in tax to GDP ratio of a country indicates which of the following? 1. Slowing economic growth rates 2. Less equitable distribution of national in...

2015·Economy
Solve

Which one of the following is a purpose of ‘UDAY’, a scheme of the Government?

2016·Economy
Solve

Which one of the following best describes the 'Crowding Out Effect' in the context of fiscal policy ?

2026·Economy
Solve

Which one of the following is likely to be the most inflationary in its effect?

2013·Economy
Solve

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