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I) Public Expenditure : in generation of employment, increase in
Public expenditure is that expenditure which production, price stability etc. is known as
is incurred by the public authority [Central, developmental expenditure. For example,
State and Local Bodies] for protection of their expenditure on health, education, industrial
citizens, for satisfying their collective needs and development, social welfare, Research and
for promoting their economic and social welfare. Development (R & D) etc.
th
Till 20 century, the majority of the D) Non-Developmental Expenditure : On the
governments had adopted a policy of laissez other hand, that government expenditure
faire. Under this policy, the functions of which does not yield any direct productive
government were restricted to the obligatory impact on the country is called non-
functions. But, the modern governments not developmental expenditure. For example,
only perform the obligatory functions such administration costs, war expenditure etc.
as defence and civil administration, but also These are unproductive in nature.
perform optional functions for promoting social
and economic development of their countries. Do you know?
Therefore, study of public expenditure is an Trends in Public Expenditure in India
important part of study of public finance. since Independence
Sr. No. Year Total Expenditure (` Cr.)
Classification of Public Expenditure :
Different economists have classified public 1 1991-92 72,317
2 2001-02 3,62,450
expenditure on different bases. We shall now
study some of the important classification of 3 2005-06 5,06,123
public expenditure. 4 2009-10 10,24,487
A) Revenue Expenditure : Revenue 5 2015-16 11,95,025
expenditure of the government is for 6 2016-17 13,74,203
incurred carrying out day-to-day functions 7 2017-18 14,35,233
of the government departments and 8 2018-19 17,29,682
various services. It is incurred regularly. Source - Economic Survey, Government of India- 2018-19
For example, administration costs of the Given table shows trends in public
government, salaries, allowances and expenditure in India since 1991-92 for
pensions of government employees, medical select years. It can be clearly observed
and public health services etc. that there is tremendous growth in the total
public expenditure of the country over the
B) Capital Expenditure : Capital expenditure period.
of the government is expenditure for
progress and development of the country. Reasons for Growth in Public Expenditure :
For example, huge investments in different It is observed that there is a continous
development projects, loans granted to growth in public expenditure in a developing
the state governments and government country like India.
companies, repayment of government Let us study some of the important reasuns :
loans etc. 1) Increase in the Activities of the
C) Developmental Expenditure : Government : As mentioned earlier,
Developmental expenditure is productive the modern government performs many
in nature. The expenditure which results functions for the social and economic
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