What is Public Expenditure ? Meaning, Definition
Public expenditure refers to Government expenditure i.e. Government spending. It is incurred past times Central, State in addition to Local governments of a country.
Public expenditure tin last defined as, "The expenditure incurred past times populace authorities similar central, province in addition to local governments to satisfy the collective social wants of the people is known every bit populace expenditure."
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Throughout the 19th Century, most governments followed laissez faire economical policies & their functions were exclusively restricted to defending aggression & maintaining law & order. The size of pubic expenditure was real small.
But at nowadays the expenditure of governments all over has significantly increased. In the early on 20th Century, John Maynard Keynes advocated the role of populace expenditure inward decision of marking of income in addition to its distribution.
In developing countries, populace expenditure policy non exclusively accelerates economical growth & promotes job opportunities but likewise plays a useful role inward reducing poverty in addition to inequalities inward income distribution.
Classification of Public Expenditure
Classification of Public expenditure refers to the systematic organisation of dissimilar items on which the regime incurs expenditure.
Different economists accept looked at populace expenditure from dissimilar signal of view. The next classification is a based on these dissimilar views.
1. Functional Classification
Some economists assort populace expenditure on the footing of functions for which they are incurred. The regime performs diverse functions similar defence, social welfare, agriculture, infrastructure in addition to industrial development. The expenditure incurred on such functions autumn nether this classification. These functions are farther divided into subsidiary functions. This sort of classification provides a clear thought close how the populace funds are spent.
2. Revenue in addition to Capital Expenditure
Revenue expenditure are electrical flow or consumption expenditures incurred on civil administration, defense forces, populace wellness in addition to education, maintenance of regime machinery. This type of expenditure is of recurring type which is incurred yr afterwards year.
On the other hand, uppercase expenditures are incurred on edifice durable assets, similar highways, multipurpose dams, irrigation projects, buying mechanism in addition to equipment. They are non recurring type of expenditures inward the shape of uppercase investments. Such expenditures are expected to ameliorate the productive capacity of the economy.
3. Transfer in addition to Non-Transfer Expenditure
A.C. Pigou, the British economist has classified populace expenditure every bit :-
- Transfer expenditure
- Non-transfer expenditure
Transfer Expenditure :-
Transfer expenditure relates to the expenditure against which in that place is no corresponding return.
Such expenditure includes populace expenditure on :-
- National Old Age Pension Schemes,
- Interest payments,
- Subsidies,
- Unemployment allowances,
- Welfare benefits to weaker sections, etc.
By incurring such expenditure, the regime does non larn anything inward return, but it adds to the welfare of the people, peculiarly belong to the weaker sections of the society. Such expenditure basically results inward redistribution of coin incomes inside the society.
Non-Transfer Expenditure :-
The non-transfer expenditure relates to expenditure which results inward creation of income or output.
The non-transfer expenditure includes evolution every bit good every bit non-development expenditure that results inward creation of output postulate or indirectly.
- Economic infrastructure such every bit power, transport, irrigation, etc.
- Social infrastructure such every bit education, wellness in addition to household unit of measurement welfare.
- Internal law in addition to monastic say in addition to defence.
- Public administration, etc.
By incurring such expenditure, the regime creates a good for you lot atmospheric condition or surround for economical activities. Due to economical growth, the regime may last able to generate income inward shape of duties in addition to taxes.
4.1 Productive in addition to Unproductive Expenditure
This classification was made past times Classical economists on the footing of creation of productive capacity.
Productive Expenditure :-
Expenditure on infrastructure development, populace enterprises or evolution of agriculture increment productive capacity inward the economic scheme in addition to convey income to the government. Thus they are classified every bit productive expenditure.
Unproductive Expenditure :-
Expenditures inward the nature of consumption such every bit defence, involvement payments, expenditure on law in addition to order, populace administration, practice non practice whatever productive property which tin convey income or returns to the government. Such expenses are classified every bit unproductive expenditures.
4.2 Development in addition to Non-Development Expenditure
Modern economists accept modified this classification into distinction betwixt evolution in addition to non-development expenditures.
Development Expenditure :-
All expenditures that promote economical growth in addition to evolution are termed every bit evolution expenditure. These are the same every bit productive expenditure.
Non-Development Expenditure :-
Unproductive expenditures are termed every bit non evolution expenditures.
5. Grants in addition to Purchase Price
This classification has been suggested past times economist Hugh Dalton.
Grants :-
Grants are those payments made past times a populace ascendence for which their may non last whatever quid-pro-quo, i.e., in that place volition last no receipt of goods or services. For example, erstwhile historic menstruum pension, unemployment benefits, subsidies, social insurance, etc. Grants are transfer expenditures.
Purchase prices :-
Purchase prices are expenditures for which the regime receives goods in addition to services inward return. For example, salaries in addition to reward to regime employees in addition to purchase of consumption in addition to uppercase goods.
6. Classification According to Benefits
Public expenditure tin last classified on the footing of benefits they confer on dissimilar groups of people.
- Common benefits to all : Expenditures that confer mutual benefits on all the people. For example, expenditure on education, populace health, transport, defence, law in addition to order, full general administration.
- Special benefits to all : Expenditures that confer special benefits on all. For example, management of justice, social safety measures, community welfare.
- Special benefits to some : Expenditures that confer postulate special benefits on sure as shooting people in addition to likewise add together to full general welfare. For example, erstwhile historic menstruum pension, subsidies to weaker section, unemployment benefits.
7. Hugh Dalton's Classification of Public Expenditure
Hugh Dalton has classified populace expenditure every bit follows :-
- Expenditures on political executives : i.e. maintenance of ceremonial heads of state, similar the president.
- Administrative expenditure : to keep the full general management of the country, similar regime departments in addition to offices.
- Security expenditure : to keep state of war machine in addition to the police describe forces.
- Expenditure on management of justice : include maintenance of courts, judges, populace prosecutors.
- Developmental expenditures : to promote growth in addition to evolution of the economy, similar expenditure on infrastructure, irrigation, etc.
- Social expenditures : on populace health, community welfare, social security, etc.
- Pubic debt charges : include payment of involvement in addition to repayment of regulation amount.
