INTRODUCTION
Public expenditure refers to the money spent by the government to meet its social, economic, and political objectives. It includes all the expenses incurred by the government, such as salaries and wages of government employees, subsidies, grants, pensions, education, healthcare, infrastructure development, defense, and public welfare programs.
Public expenditure plays a crucial role in the economy of a country as it directly affects the standard of living of citizens, economic growth, and distribution of resources. The following are the main concepts associated with public expenditure:
- OBJECTIVES OF PUBLIC EXPENDITURE : The primary objective of public expenditure is to achieve economic growth and social welfare. The government spends money to provide basic services like healthcare, education, and housing to citizens. It also spends money on infrastructure projects like roads, bridges, and airports to boost economic growth. Public expenditure is also used to redistribute income and reduce poverty by providing subsidies, grants, and pensions to the poor and disadvantaged sections of society.
- TYPES OF PUBLIC EXPENDITURE : Public expenditure can be classified into two types: revenue expenditure and capital expenditure. Revenue expenditure refers to the expenditure incurred on day-to-day activities like salaries, wages, and maintenance costs. Capital expenditure refers to the expenditure incurred on building long-term assets like infrastructure, schools, and hospitals. Capital expenditure is critical for economic growth, while revenue expenditure is essential for the smooth functioning of the government.
- SOURCES OF PUBLIC EXPENDITURE : The government raises funds for public expenditure through various sources like taxation, borrowing, and grants from international organizations. The government collects taxes from individuals and businesses to fund public expenditure. It also borrows money from the market or international organizations to finance large-scale projects. Grants from international organizations are also used to fund specific projects.
- IMPACT OF PUBLIC EXPENDITURE : Public expenditure has a significant impact on the economy of a country. It affects economic growth, employment, income distribution, and poverty reduction. Public expenditure on infrastructure and education creates employment opportunities and boosts economic growth. Social welfare programs like pensions and subsidies reduce poverty and improve income distribution. However, excessive public expenditure can lead to inflation and budget deficits, which can negatively affect the economy.
CONCLUSION
To summarize, public expenditure refers to the money spent by the government on various social, economic, and political objectives. It is essential for the government to spend money on basic services like healthcare, education, and infrastructure to boost economic growth and improve the standard of living of citizens. Public expenditure can be classified into revenue and capital expenditure, and the government raises funds through various sources like taxation, borrowing, and grants. Public expenditure has a significant impact on the economy, and it is crucial to balance the objectives of public expenditure with the available resources to avoid negative consequences like inflation and budget deficits. Overall, public expenditure plays a crucial role in the economic development and social welfare of a country.