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

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

1. What is the classification of public expenditure?
Ans. Public expenditure can be classified into two main categories: revenue expenditure and capital expenditure. Revenue expenditure refers to the day-to-day expenses of the government, such as salaries, pensions, subsidies, and maintenance costs. Capital expenditure, on the other hand, includes investments in infrastructure, construction of public buildings, and acquisition of assets that provide long-term benefits to the economy.
2. What is the importance of classifying public expenditure?
Ans. The classification of public expenditure is important for several reasons. Firstly, it helps in determining the purpose of government spending and ensures transparency and accountability. It also assists in budgeting and resource allocation, as different categories of expenditure may require different levels of funding. Additionally, the classification helps in analyzing the impact of government spending on the economy and evaluating the effectiveness of various public policies.
3. What are the subcategories of revenue expenditure?
Ans. Revenue expenditure can be further categorized into two subcategories: ordinary revenue expenditure and grants-in-aid to states and union territories. Ordinary revenue expenditure includes items like salaries, pensions, interest payments, subsidies, and grants. Grants-in-aid to states and union territories refer to the financial assistance provided by the central government to the state governments for specific purposes, such as education, healthcare, or infrastructure development.
4. What are the subcategories of capital expenditure?
Ans. Capital expenditure can be divided into two subcategories: plan expenditure and non-plan expenditure. Plan expenditure includes investments made by the government towards achieving specific developmental goals outlined in its five-year plans. This category mainly focuses on sectors like education, healthcare, infrastructure, and agriculture. Non-plan expenditure, on the other hand, refers to investments made by the government that do not fall under the purview of the five-year plans, such as defense, debt servicing, and subsidies.
5. How does the classification of public expenditure impact the fiscal deficit?
Ans. The classification of public expenditure plays a crucial role in determining the fiscal deficit of a country. Revenue expenditure, which includes day-to-day expenses, does not contribute to the creation of assets or productive capacity. Therefore, if revenue expenditure exceeds revenue receipts, it leads to a revenue deficit. On the other hand, capital expenditure contributes to asset creation and enhances the productive capacity of the economy. If the government spends more on capital expenditure than it receives, it leads to a capital deficit. The combined effect of revenue and capital deficits results in a fiscal deficit, which indicates the borrowing requirements of the government.
37 videos|35 docs|15 tests
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