India has adopted economic planning as a strategy for economic development. For stepping up the rate of economic development five-year plans have been formulated. So far ten five-year plans have been completed. The expenditure incurred on the items relating to five year plans is termed as plan expenditure. Such expenditure is incurred by the Central Government.
A provision is made for such expenditure in the budget of the Central Government. Assistance given by the Central Government to the State Governments and Union Territories for plan purposes also forms part of the plan expenditure. Plan expenditure is subdivided into Revenue Expenditure and Capital Expenditure.
The expenditure provided in the budget for routine normal activities of the government is called non-plan expenditure. Its examples are expenditure incurred on administrative services, salaries and pension etc. There is no provision in the plan for such expenditure. Non-plan expenditure is also sub-divided into revenue expenditure and capital expenditure.