Growth of India's Public Expenditure

Topics: Public good, Public finance, Economics Pages: 21 (5637 words) Published: December 17, 2012
Q.1 : Explain the meaning, importance and objectives of public expenditure. Ans. MEANING OF PUBLIC EXPENDITURE:-
Public Expenditure refers to Government Expenditure. It is incurred by Central and State Governments. The Public Expenditure is incurred on various activities for the welfare of the people and also for the economic development, especially in developing countries. In other words The Expenditure incurred by Public authorities like Central, State and local governments to satisfy the collective social wants of the people is known as public expenditure.

A.       NEED I IMPORTANCE/ SIGNIFICANCE OF PUBLIC EXPENDITURE :- In modern economic activities public expenditure has to play an important role. It helps to accelerate economic growth and ensure economic stability. Public Expenditure can promote economic development as follows :- 1.        To promote rapid economic development.

2.        To promote trade and commerce.
3.        To promote rural development
4.        To promote balanced regional growth
5.        To develop agricultural and industrial sectors 6.        To build socio-economic overheads eg. roadways, railways, power etc. 7.        To exploit and develop mineral resources like coal and oil. 8.        To provide collective wants and maximise social welfare. 9.        To promote full - employment and maintain price stability. 10.      To ensure an equitable distribution of income. Thus public expenditure has to create and maintain conditions conducive to economic development. It has to improve the climate for investment. It should provide incentives to save, invest and innovate. B.       OBJECTIVES OF PUBLIC EXPENDITURE :-

The major objectives of public expenditure are
1)             Administration of law and order and justice. 2)             Maintenance of police force.
3)             Maintenance of army and provision for defence goods. 4)             Maintenance of diplomats in foreign countries.       5)             Public Administration.
6)             Servicing of public debt.
7)             Development of industries.
8)             Development of transport and communication. 9)             Provision for public health.
10)         Creation of social goods.
In a modern welfare state, the importance of public expenditure have increased. The total Central Government’s expenditure (Revenue and Capital) rose from Rs. 98,272 crores in 1990-91 to Rs. 10,18,526 crores in 2009-10. Q.2: Explain the Classification of Public Expenditure in India.                               OR                          Explain in detail the types of Public Expenditure. ANS: A. CLASSIFICATION / TYPES OF PUBLIC EXPENDITURE :-

Classification of public expenditure refers to the systematic arrangement of different items on which the government incurs expenditure. Public expenditure can be classified as follows :-

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            Capital               Productive               Transfer                Plan                               Other               And                    And                           And                     And                        Classification           Revenue             Non-Productive       Non – Transfer   Non - Plan 1)        Capital And Revenue Expenditure :-

Capital Expenditure of the government refers to that expenditure which results in creation of fixed assets. They are in the form of investment. They add to the net productive assets of the economy. Capital Expenditure is also known as development expenditure as it increases the productive capacity of the economy. It is an investment expenditure and a non-recurring type of expenditure. For Eg. Expenditure - on agricultural and industrial development, irrigation dams, public -enterprises etc, are all capital expenditures Revenue expenditures are current or consumption expenditures incurred on civil administration, defence forces, public health and , education, maintenance of government machinery...
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