1. Need/Importance/Significance
Public Expenditure
Meaning -
Need/Importance/Significance
1.Collective wants and social welfare
2.Socio-economic overheads
3.Balanced Regional Growth
4.Development of Agricultural and Industrial
Sectors
5. To promote Trade and Commerce
6.Rural Development

2. 7. Full Employment
8. Price Stability
9. Equal Distribution of Income
10. Rapid Economic Development
Classification/Types of Public Expenditure
Revenue and Capital Expenditure
Productive and Unproductive Expenditure
Transfer and Non-Transfer Expenditure
Plan and Non-Plan Expenditure
Dalton’s Classification

3. Revenue and Capital Expenditure
Revenue Expenditure –Consumption
Expenditure- Public administration, defence forces, public health and education,
maintenance of Govt. machinery, subsidies
and interest payments
Classified –
i. Development Expenditure
Contributes to the development of the
country.
Example- maintenance of education and
public health infrastructure –

4. ii. Non-Development Expenditure
Human Development, Productive of Capital
ii. Non-Development Expenditure
Not directly contribute to economic development
Example –Administrative expenditure,
interest payments.
Capital Expenditure –Form of investment-Add
net productive assets-
Classified-
i. Development Expenditure -

5. Example- Agricultural and Industrial
Development, Public
Enterprises.
ii. Non-Development Expenditure-
Example- Expenditure on Defence and
Administration
b) Productive and Unproductive
Expenditure-
Productive Expenditure-Social-Economic
Overhead, Infrastructure Facilities, Public

6. Utilities – Electricity, Water Supply, Educational
and Health Facilities etc.
Tax and Non-Tax Revenue
Unproductive Expenditure –
Example – Expenditure on Defence and
Administration
c) Transfer and Non-Transfer Expenditure-
Transfer of resources from one group to
another – Equality and Social Justice-
No output and Income

7. >The Tax Revenue raised from the rich and distributed to the poor
Example –
>Subsidies
>The Tax Revenue raised from the
rich and distributed to the poor
> Pensions
> Financial aid between countries
Non-Transfer Expenditure –
Purchases current services of productive
resources – creates output and income
Example – Public Administration, Defence,
Development Plans etc.

8. d) Plan and Non-Plan Expenditure –
Plan Expenditure - Included in ongoing
five - year plan
Example – Implementation of NREGS,
Sarva Shiksha Abhiya ect.
Non-Plan Expenditure - Not included in
ongoing five - year plan
Example – Defence and Internal Security.
e) Dalton’s Classification-

9. i. Administrative Expenditure – To maintain the general administration
ii. Security Expenditure - To maintain the armed
forces and police forces
iii. Development Expenditure – To promote
growth and development
iv. Social Expenditure – On public health, welfare, social security.