Indian Public Finance: Public Expenditure

Study Notes

Indian Public Finance: Public Expenditure

Definition: Public expenditure refers to the expenses incurred by the government in providing public goods and services.
Objectives of Public Expenditure:
- Economic development
- Redistribution of income
- Provision of public goods
- Stabilization of the economy
Classification of Public Expenditure:
1. Functional Classification:
  - Economic Services: Infrastructure, agriculture, industrial development
  - Social Services: Health, education, welfare programs
  - General Services: Defense, police, administrative services
2. Resource Classification:
  - Revenue Expenditure: Regular operational expenses (salaries, maintenance)
  - Capital Expenditure: Investments in assets (infrastructure projects, equipment)
3. Growth Classification:
  - Development Expenditure: Investments aimed at economic growth (development programs)
  - Non-Development Expenditure: Routine expenditures (interest payments, subsidy)
Trends in Public Expenditure:
- Increase in social sector spending (health and education)
- Rising capital expenditure for infrastructure projects
- Growing emphasis on welfare schemes
Importance of Public Expenditure:
- Promotes economic growth by investing in infrastructure and services
- Reduces inequalities through subsidization and welfare programs
- Stabilizes the economy through fiscal policies
Challenges:
- Fiscal deficits and sustainability of public debt
- Inefficiencies and wastage in spending
- Balancing growth and social equity
Recent Initiatives:
- National Infrastructure Pipeline: Boosting investments in infrastructure
- Direct Benefit Transfer Scheme: Reducing leakages in subsidy distribution
- Focus on Sustainable Development Goals (SDGs) through targeted spending
Impact of Public Expenditure:
- Improvement in living standards through better health and education
- Job creation in various sectors
- Enhanced economic stability and growth prospects

Public Expenditure in India

Public expenditure: Government spending on public goods and services
Objectives of Public Expenditure:
- Economic growth by investing in infrastructure and services
- Income redistribution through welfare programs
- Provision of public goods
- Stabilization of the economy through fiscal policies

Classification of Public Expenditure

Functional classification: Categorizes spending based on its function
- Economic services: Includes infrastructure, agriculture, and industrial development
- Social services: Includes health, education, and welfare programs
- General services: Includes defense, police, and administrative services
Resource classification: Categorizes spending based on its impact on assets
- Revenue expenditure: Regular operational expenses like salaries and maintenance
- Capital expenditure: Investments in assets, such as infrastructure projects and equipment
Growth classification: Categorizes spending based on its impact on economic growth
- Development expenditure: Investments aimed at economic development, such as development programs
- Non-development expenditure: Routine expenditures, such as interest payments and subsidies

Trends in Public Expenditure

Increased social spending
- Higher spending on health and education
Increased capital expenditure
- Rising investments in infrastructure projects
Growing emphasis on welfare schemes
- Focus on providing essential services to vulnerable populations

Challenges to Public Expenditure

Fiscal deficits
- Government spending exceeds revenue
Sustainability of public debt
- Long-term ability to repay government debt
Inefficiencies and wastage in spending
- Need to improve transparency and accountability
Balancing growth and social equity
- Ensuring that public spending benefits all segments of society

Recent Initiatives

National Infrastructure Pipeline
- Boosts investments in infrastructure to promote economic growth
Direct Benefit Transfer Scheme
- Reduces leakages in subsidy distribution by transferring funds directly to beneficiaries
Focus on Sustainable Development Goals (SDGs)
- Targeted spending to achieve social and environmental goals

Impact of Public Expenditure

Improved living standards through better health and education
Job creation in various sectors
Enhanced economic stability and growth prospects

Description

This quiz explores the concept of public expenditure in India, highlighting its objectives, classifications, and importance in economic development. It covers functional, resource, and growth classifications, helping you understand how government spending affects society. Test your knowledge on this vital aspect of public finance.