Public Expenditure and Economic Growth in India

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Public Expenditure and Economic Growth in India

By | Jan. 2012
Page 1 of 43
PUBLIC EXPENDITURE AND ECONOMIC GROWTH

WHAT IS PUBLIC EXPENDITURE?

MEANING:
Public expenditure refers to Government expenditure i.e. Government spending. It is incurred by Central, State and Local governments of a country.

Spending by government , municipality, or any local authority. It covers things such as health, education or social services and is funded by tax revenue. It is one of the element that make up aggregate expenditure.

Government spending or government expenditure is classified by economists into three main types. Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is classed as government final consumption expenditure. Government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending, is classed as government investment (gross fixed capital formation), which usually is the largest part of the government gross capital formation. Acquisition of goods and services is made through own production by the government (using the government's labor force, fixed assets and purchased goods and services for intermediate consumption) or through purchases of goods and services from market producers. Government expenditures that are not acquisition of goods and services, and instead just represent transfers of money, such as social security payments, are called transfer payments. Government spending can be financed by seignior age, taxes, or government borrowing.

DEFINITION:
Public expenditure can be defined as, "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."

Throughout the 19th Century, most governments followed laissez faire economic policies & their functions were only restricted to defending aggression & maintaining law & order. The size of public...

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