Question

Explain the classification of public expenditure.

Answer 1

Classification of public expenditure is as follows:

1. Revenue Expenditure: Revenue expenditure of the government is incurred for carrying out day-to-day functions of the government departments and various services. It is incurred regularly. For example, administration costs of the government, salaries, allowances and pensions of government employees, medical and public health services etc.
2. Capital Expenditure: Capital expenditure of the government is expenditure for the progress and development of the country. For example, huge investments in different development projects, loans granted to the state governments and government companies, repayment of government loans etc.
3. Developmental Expenditure: Developmental expenditure is productive in nature. The expenditure which results in the generation of employment, increase in production, price stability, etc., is known as developmental expenditure. For example, expenditure on health, education, industrial development, social welfare, Research and Development (R&D), etc.
4. Non-Developmental Expenditure: On the other hand, government expenditure that does not yield any direct productive impact on the country is called non-developmental expenditure. For example, administration costs, war expenditures, etc. These are unproductive in nature.