What is the principal types of Public Expenditure ?

Ans.

Principal Types of Public Expenditure

Public expenditures are classified in many ways. However, principal types of public expenditures are as under –

(1) Development Productive Expenditure: This relates to growth and development activities of the Government. It results in the improvement of productive capacity. This includes expenditure on education, health, industry, agriculture, transport, roads, canals, rural development, water works and generation of power.

(2) Non Development or Unproductive Expenditure: Non-development expenditure of the Government relates to non-development activities of the Government. It does not raise the productive capacity of the nation. This includes expenditure on administration, police and military, law and order, collection of taxation, interest on loans, payment of old age pensions, etc.

(3) Plan Expenditure : Plan expenditure refers to that expenditure which is incurred by the Government within the purview of its planned development programmes. This includes both consumption as well as investment expenditure by the Government or Planning commission of the Government. Expenditure on agriculture, power, communication, industry, transport, public utilities, health and education are some of the notable examples of plan expenditure.

(4) Non-plan Expenditure: This refers to all such Government expenditures which happened to be beyond the purview of its planned development programmes. This includes both consumption as well as investment expenditure by the Government. This includes expenditure on subsidies, defence, law and order as well as payment of interest on loans by the Government.

(5) (a) Transferable Expenditure: Prof. Pigou has classified the public expenditure into transferable and non-transferable expenditure. Transferable Expenditure are the expenditures by the Government which are not related to the production of goods and services or generation of income in the economy. These expenditures cause transfer of income from Government to the individuals and households. Accordingly these expenditures tend to change the distribution of income in the society. Scholarships and unemployment allowance by the Government are two notable examples of transferable expenditures.

(b) Non-Transferable Expenditure: These are the expenditures which result in the exchange of goods and services for money. Prof. Pigou calls these expenditures as real expenditures. These include mainly the payments made by the Government on the use of factor services for productive activities. Expenditure on armaments, education, post and telegraph, agricultural development and railways are some important examples of non transferable expenditures.

(6) Current and Capital Expenditure : Current expenditure is that expenditure which is met out of the current revenue and does not lead to creation of some capital assets. Government expenditure on defence, administration, etc. are the example of current expenditure.

(7) Primary and Secondary Expenditure : On the basis of importance, public expenditure can be classified as primary and secondary expenditure. Primary expenditure are those expenditure which necessary for the existence of a country. For example, expenditure on law and order, defence administration are the primary expenditure. On the contrary, secondary expenditure are meant for achieving welfare and development of the country. In the modern times both primary and secondary expenditure are necessary for the development of a country.

(8) Progressive, proportional and Regressive Public Expenditure : On the basis of effects of public expenditure on society, Prof. Dalton, classified public expenditure as progressive, proportional and regressive, In case of progressive public expenditure higher income bracket people get less benefit out of the government expenditure. Government expenditure on education, health care, fair, price shops etc. benefits most to the poor than the rich. Proportional public expenditure are those expenditure which benefited proportionately irrespective of the level of income. A Fixed percentage increase in the salary will have proportional effect on every employee in an example of proportional public expenditure. In case of regressive public expenditure higher income bracket people get more benefits out of the public expenditure. Thus, regressive public expenditure causes income inequalities in the society.