Public Expenditure

Public Expenditure
Meaning Need/Importance/Significance
1.Collective wants and social welfare
2.Socio-economic overheads
3.Balanced Regional Growth
4.Development of Agricultural and Industrial
5. To promote Trade and Commerce
6.Rural Development
7. Full Employment
8. Price Stability
9. Equal Distribution of Income
10. Rapid Economic Development
Classification/Types of Public Expenditure
Revenue and Capital Expenditure
Productive and Unproductive Expenditure
Transfer and Non-Transfer Expenditure
Plan and Non-Plan Expenditure
Dalton’s Classification
a) Revenue and Capital Expenditure
Revenue Expenditure –Consumption
Expenditure- Public administration,
defence forces, public health and education,
maintenance of Govt. machinery, subsidies
and interest payments
Classified –
i. Development Expenditure
Contributes to the development of the
Example- maintenance of education and
public health infrastructure –
Human Development, Productive of Capital
ii. Non-Development Expenditure
Not directly contribute to economic
Example –Administrative expenditure,
interest payments.
Capital Expenditure –Form of investment-Add
net productive assetsClassifiedi. Development Expenditure -
Example- Agricultural and Industrial
Development, Public
ii. Non-Development ExpenditureExample- Expenditure on Defence and
b) Productive and Unproductive
ExpenditureProductive Expenditure-Social-Economic
Overhead, Infrastructure Facilities, Public
Utilities – Electricity, Water Supply, Educational
and Health Facilities etc.
Tax and Non-Tax Revenue
Unproductive Expenditure –
Example – Expenditure on Defence and
c) Transfer and Non-Transfer ExpenditureTransfer of resources from one group to
another – Equality and Social JusticeNo output and Income
Example –
>The Tax Revenue raised from the
rich and distributed to the poor
> Pensions
> Financial aid between countries
Non-Transfer Expenditure –
Purchases current services of productive
resources – creates output and income
Example – Public Administration, Defence,
Development Plans etc.
d) Plan and Non-Plan Expenditure –
Plan Expenditure - Included in ongoing
five - year plan
Example – Implementation of NREGS,
Sarva Shiksha Abhiya ect.
Non-Plan Expenditure - Not included in
ongoing five - year plan
Example – Defence and Internal Security.
e) Dalton’s Classification-
i. Administrative Expenditure – To maintain the
general administration
ii. Security Expenditure - To maintain the armed
forces and police forces
iii. Development Expenditure – To promote
growth and development
iv. Social Expenditure – On public health,
welfare, social security.

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