Answer: Public expenditure is the expenditure incurred by public authorities (central, state and local governments). It is classified as:
- Revenue and capital expenditure: Revenue expenditure is recurring expenditure that does not create assets, e.g. salaries, interest, subsidies. Capital expenditure creates assets, e.g. roads, dams, buildings, repayment of loans.
- Developmental and non-developmental expenditure: Developmental expenditure promotes growth, e.g. education, health, irrigation, infrastructure. Non-developmental expenditure covers defence, administration, interest payments.
- Plan and non-plan expenditure: Plan expenditure was incurred on projects under the Five Year Plans; non-plan expenditure covered regular items like interest, subsidies, defence.
- Productive and unproductive expenditure: Productive expenditure raises productive capacity (railways, irrigation); unproductive expenditure does not directly add to output (law and order, defence).
- Transfer and non-transfer expenditure: Transfer expenditure has no corresponding return of goods or services, e.g. pensions, scholarships, unemployment allowance. Non-transfer expenditure brings goods and services in return, e.g. salaries of employees, purchase of goods.
