Classification of public expenditure, Public finance Video Lecture | Public Finance - B Com

public expenditure it is the expenditure
made by the public authorities whether
the central government state government
or the local bodies for their own
maintenance and for promoting economic
and social welfare in the country there
are the different types of public
expenditure like direct expenditure on
transfer expenditure developmental
expenditure an on developmental
expenditure productive expenditure and
non-productive expenditure now let's
look into the details of each one first
is the direct expenditure it is the
expenditure which is made by the
government on the purchase of goods in
services and on the current services or
factors of production it is also known
as exhaustive or transfer expenditure it
is made on the maintenance of defense
civil services educational services like
schools colleges etc next we have
transfer expenditure transfer
expenditure takes the form of payments
which are made without any return of
factor services or in other words we can
say that the transfer expenditure is
that which is made by the government
without getting anything in return this
type of expenditure do not create any
current production they do not help in
increasing the current production for
example the government makes payment for
the old-age pensions unemployment
allowances sickness benefits etc next
category of the public expenditure we
have developmental expenditure
developmental expenditure is made on the
economic and social development of the
country it is made by the government on
the establishment of schools colleges
hospitals in the development of
agricultural sector etc next we have is
the non developmental non developmental
expenditure is made by the government
for essential services of the government
for example on the maintenance of police
force on the maintenance of defense on
the giving pensions to the old-age
people as well as the retire personnel
from the Defense Forces or from any
government offices
next type of expenditure is the
productive expenditure productive
expenditure is that which is made by the
government to improve the productive
capacity of the country it is generally
made on the establishment of factories
so that the production can be improved
as well as the employment can be
provided to the people in various
sectors secondly the education in the
field of Education the government makes
lot of expenditure on the establishment
of schools and colleges ultimately the
schools and colleges provides skills as
well as efficiency to the people to get
the jobs and to produce more health also
is indirectly responsible for increasing
the productive capacity of the country
healthy other people more will be their
productive capacity next is there after
productive expenditure we have
unproductive expenditure unproductive
expenditure is that which is made by the
government on the non-productive
activities of the economy like for the
maintenance of defense for the
maintenance of administration for the
smooth functioning of the economy no
doubt these things they help in the
smooth functioning of the economy but
these sectors or these areas do not help
in increasing the productive capacity of
the country now we are clear with the
different types of the public
expenditure next we have the effects of
public expenditure effects of public
expenditure can be divided into the
various categories like the effect of
public expenditure on the production
public expenditure effects on the
production first one it creates income
for individuals how it creates income
for the individuals because whenever the
government spends money on the
establishment of industries on the
establishment of the various production
units it provides employment for the
people and providing employment for the
people ultimately it creates a source of
income for the individuals and with the
help of the source of income for the
individuals the standard of living of
the people also improves second
increases the efficiency of the people
public expenditure
to help and increasing the efficiency of
the people how because the public
expenditure can be utilized for
improving this skills for improving the
training for providing the training as
well as for providing the proper
education to the people as a result as
more and more people they get the prop
adequate education adequate training
their efficiency level increases in the
economy and the health start helping in
increasing the production of the economy
next it creates human skills public
expenditure is very helpful in
increasing and creating the human skills
through education through training and
through skill improvement programs next
as the promote ski industry public
expenditure plays a very important role
in the establishment as well as in the
development of the key industries key
industries means the main industries of
the economy like iron and steel industry
because these key industries they need
huge expenditure and generally the
private interpreter is the private
industries they are not at all
interested in establishment of the key
industries because it these industries
then use huge amount of investment and
moreover their gestation period is quite
long as a result the government has to
take initiative to start the key
industries or the main industries in the
countries and these industries they
provide a base to the further industries
of the economy so it helps in increasing
the key industries or the main
industries or the basic industries in
the economy lastly we have the public
expenditure is also helpful in providing
the social security schemes social
security schemes like public
expenditures is helpful in providing the
pension it is helpful in providing the
Provident Fund it is helpful in
providing the unemployment allowances it
is helpful in providing the old-age
pensions to the people so that they can
have the feeling of social security in
the economy Effects of public
expenditure on investment public
expenditure encourages the investors to
invest more how it encourages the
investors to invest more it encouraged
them by giving the subsidies it helps
them to invest more in those areas which
are the backward areas or the neglected
areas of the country because whenever
the government gives any subsidies any
subsidies or any tax holidays to the
investors it is giving a relaxation as
well as a benefit along with the
encouragement to them to invest in that
specific area next public expenditure is
also helpful in creating economic and
social overheads social overheads like
the establishment of schools providing
the housing facility providing the
electricity facility even in the case of
your economic or overheads we have the
construction of roads construction of
bridges construction of industries on
the irrigation facilities along with
industry and agriculture it is helpful
in increasing these things and
ultimately they all these areas they
move towards the economic development of
the country next is the maintenance of
economic and social overheads a public
expenditure is not only useful in the
construction in the creation of economic
and social overheads but it is also
helpful in the maintenance of economic
and social overheads it's not like that
once we have constructed the overheads
and after that we don't need mean it is
not required to look into the
maintenance it is required we need to
look after economic and the social
overheads otherwise their ability their
capacity also goes down next it is
helpful in providing financial
assistance and subsidies to the private
sector with the help of public
expenditure made by the government the
government can provide the financial
help and a subsidies to the private
sector so that they can invest in the
specific areas and they can invest in
the production of the specific
commodities which can be useful and
beneficial for the economy the expect of
public expenditure on income
distribution first one reduces income
inequality the public expenditure can be
helpful in reducing the income
inequalities in the society how it can
be helpful in reducing income
inequalities in the society by providing
more facilities for
the welfare of the poorer section of the
society like by providing them free
education by providing them free health
facilities by providing them the free
Russian or distribution of Russian to
the people it helps them in increasing
the standard of living with the help of
public expenditure the government can
also provide employment opportunities
for the poorer section of the society
which will under X in increasing the
source of income