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 Sectors 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 a) b) c) d) e) 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 country. Example- maintenance of education and public health infrastructure – Human Development, Productive of Capital ii. Non-Development Expenditure Not directly contribute to economic development Example –Administrative expenditure, interest payments. Capital Expenditure –Form of investment-Add net productive assetsClassifiedi. Development Expenditure - Example- Agricultural and Industrial Development, Public Enterprises. ii. Non-Development ExpenditureExample- Expenditure on Defence and Administration 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 Administration c) Transfer and Non-Transfer ExpenditureTransfer of resources from one group to another – Equality and Social JusticeNo output and Income Example – >Subsidies >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.