Public expenditure

Introduction 

Have you anticipated how the collective needs of the people are fulfilled by the government? Well, it’s through the public expenditure that the government fulfills the needs. The examples of public expenditure are the inducements on education, healthcare, housing, setting up of budget targets, public works, etc. Initially, some fallacies were viewing this expenditure, on the fact that this was wasteful and not at all beneficial to the society as a whole. But this fallacy fell in the twentieth century. 

As a welfare state, we now have the liberation to pinpoint how and why these expenditures are made. In fact, not only in the welfare state, liberation now goes to the capitalist countries as well. Interestingly, in today’s time, Public expenditure has broadened itself from its extent and scope, even in the nations where laissez-faire (non-interference of the government) operates. 

Meaning of Public expenditure

Expenses incurred by the administration for the efficacy of the society are referred to as public expenditure. The examples of public expenditure are expenses on infrastructure, education, security, basic healthcare and pensions. The true meaning of public expenditure ratifies the obligation to facilitate economic development with an impartial distribution of goods and services through the means of public expenditure. With the government expenditure, aid is redistributed in the society and reaches equitably to the underprivileged sections of the society. Thus, a balance is maintained for the reach of resources between the various sections of the society. 

Causes of boost in the public expenditure 

We can see a lot of justifications as to why there are inducements in the public expenditure by the government. There has been an expansion in the scope and extent of these expenditures. 

1)Defence Expenditure

Threats of war attribute to a boost in the defence expenditure of the government. Even if there are no signs of it, the threats haven’t finished yet. Thus, it is the responsibility of the government to demand reallocation and spending for the protection of the country. 

2)Size of country and population

With an enormous increase in the population of the country, it becomes the necessity of an hour to make expenses for the reallocation of the resources, so that the benefit reaches every individual. Consequently, there has been a boost in government spending. 

3)Economic development

The government of a country plays an important role in the development of a society and in forming its economy. Private entrepreneurs of a nation undergo a disability with their incapability to finance the economic development of the country. So, it is the government that covers this aspect. 

Types of public expenditure

There are various types of public expenditure. The division of government expense can be done in four ways: 

1)Developmental and Non-developmental Expenditures

Developmental expenditures include the expenses made on the service for the community as a whole. On the other hand, the non-developmental expenses are made on services like defence, administrative, and providing subsidies.

2) Revenue and Capital Expenditures

Revenue expenditures of the government are funded from its current revenue account that is financed with the help of taxes and non-tax revenues. On the other hand, the capital expenses are incurred on the public properties which can even be supported through internal and external loans. 

3)Plan and Non-Plan expenditures

Planned expenditures include expenses that are firstly planned and then are made to go. These include irrigation, agriculture, energy, rural development, flood control and mineral resources. On the other hand, the category of non-plan expenditure includes expenses that are unplanned like pensions, economic services, interest payments, etc. 

Principles overseeing public expenditure

Certain rules govern the policies and strategies of public expenditure made by the government, referred to as the canons of public expenditure. In this respect, Findlay Shirras has given four canons of public expenditure. 

1)Canon of Economy

Due to public expenditure, there shouldn’t be any kind of wastefulness of the resources. The expense should be made in the most efficient possible way. Inefficient expense leads to inequitable distribution of resources in society. 

2)Canon of Benefit

Maximum social benefits should be earned with the incurring of public expenditure by the government. One shouldn’t focus on a single community of people, rather include society as a whole in the process. However, the expenditures made on the backward sections of society cannot be considered as a violation of this canon of benefit. 

3)Canon of Sanction

Public expenditure shouldn’t be made without proper sanctions from the authorities. Arbitrariness can only be averted with the help of this canon of public expenditure. 

4)Canon of Surplus

Government revenue should always outperform its expenditure. It should avoid a deficit in public spending. However, modern economists do not attach much importance to this canon of public expenditure. They consider deficit financing as the most beneficial means of funding economic programmes of the administration.   

Conclusion

Public expenditure has both social and economic benefits to society. So, the government should make sure that the resources are diverted in the right direction and to the underprivileged sections of society as well. There shouldn’t be an unbalanced regional development in our society, which might even rise to some disintegrated forces. Interestingly, public expenditure acts as the antidote to all the hateful and reactionary elements in our society. The government should focus on the benefit of the masses rather than a single individual. With the divergence of the resources in the right direction, the all-around development of society as a whole will take place.