Question

What is the basis of classifying government expenditure into development-expenditure and non-development expenditure. Give two examples of each.

Answer 1

Basis of Classification	Developmental Expenditure	Non-Developmental Expenditure
Definition	Expenditure that directly promotes economic growth and social welfare.	Expenditure that ensures the general administration, law and order, and security of the country.
Objective	To improve the productive capacity and quality of life.	To maintain the administrative machinery and ensure security and governance.
Nature	Expenditure on activities that contribute to the development of the economy.	Expenditure on activities related to routine functioning and maintenance of law and order.
Impact on the Economy	Has a direct impact on economic development and welfare.	Has an indirect or no direct impact on economic growth but is necessary for stability and security.
Examples:	Expenditure on education and health. Expenditure on rural development schemes.	Expenditure on defence services. Expenditure on police and law courts.