Role of public expenditure in economic development. Public Expenditure on Health and Nigeria Economic Growth EduCacInfo 2019-02-26

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Public Expenditure on Defense and Economic Development: A Comparative Study on India and China: Government & Law Book Chapter

role of public expenditure in economic development

InfoSci¬ģ-OnDemand Plus, a subscription-based service, provides researchers the ability to access full-text content from over 93,000+ peer-reviewed book chapters and 24,000+ scholarly journal articles covering 11 core subjects. On the other hand, capital expenditures are incurred on building durable assets, like highways, multipurpose dams, irrigation projects, buying machinery and equipment. First, if the Government expenditure is incurred on investment projects for capital formation, for instance on building of canals, railways, and other infrastructural facilities, it will expand productive capacity and generate long-term economic growth. For instance, Government expenditure on defence and civil administration police, jail and ju¬≠diciary is said to be unproductive for it does not apparently add to the volume of production of the economy. All these enterprises are calculated to promote economic development.

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Public Expenditure: Importance and Objects of Public Expenditure

role of public expenditure in economic development

On the other hand, capital expenditure is incurred on building durable assets. The government, therefore, must try to live within its own means. Fiscal Policy Instrument: Public expenditure is considered as an important tool of fiscal policy. The increase in aggregate demand will cause fuller utilization of the existing productive ca­pacity and unemployed manpower re­sulting in expansion in volume of pro­duction, employment and national income. Each of these effects is briefly explained below.

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Public Expenditure

role of public expenditure in economic development

Though the name shows it is a tax, but in fact it is a form of expenditure, called transfer expenditure. The expansion in the Government functions and activities leads to the increase in public expenditure. The Governments followed laissez faire economic policies and their functions were only confined to defend the country from foreign aggression and to maintain law and order within their territories. Special attention has to be paid to the development of backward areas and under-developed regions. In the absence of goods and services provided by the government sector, private sector can hardly make any meaningful contribution towards production and development: According to Dalton, other things being equal, taxation should not adversely affect production and public expenditure should increase it as much as possible. The modern Governments have therefore to incur a lot of expenditure on social security measures such as old age pensions, unemployment allowances, sickness benefits. However, in the view of the present author, both these factors, one making for a continuous increase in Government activity and consequently public expenditure as emphasised by Wagner and others like war and depres­sion causing the public expenditure to rise by jerks as emphasised by Wiseman and Peacock have been responsible for the enormous increase in public expenditure.

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Public Expenditure: Causes, Principles and Importance

role of public expenditure in economic development

Indeed, economic and social environment in a country is profoundly affected by public spending. . For example, salaries and wages to government employees and purchase of consumption and capital goods. For instance, government total recurrent expenditure increased from N3819. Assuming a fixed size of a country, developing world has seen an enormous increase in population growth. Expenditure on Anti-Poverty Programmes: An important step for increasing incomes of the poor people is starting of several employment generating anti-poverty schemes.

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Effects of Public Expenditure in an Economy

role of public expenditure in economic development

Subsidies and Grants: The Central Government gives grants to State governments and the State governments to local authorities to induce them to incur some desirable expenditure. Former includes the expenditure incurred on social and community services, economic services, etc. It is important to note that redistributive effects of public expenditure must be considered in the light of how it is financed. This indicates that something is definitely wrong either with the way government expands budget or with the ways and manners it has always been allocated to each sector of the economy. Expansion in education facilities to the establishment of school and college and technical institution very large number.

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Role of Public Expenditure in a Developing Economy

role of public expenditure in economic development

Alteration in the upward direction is not difficult. The value stood at N239450. Expention of public sector: Socialistic tendencies have in modern times resulted in the expansion of public sector. In the relative absence oil perceptual weakness of institution to mobilize and direct saving, the role of the state is crucial in harnessing the resource for development since the regulatory apparatus is weak and marked signal imperfect, the states has an important role to play in allocating investment fund. It is argued and justified usually in terms of the need to maintain national security, law and order and to combat internal disturbances, etc.

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Public Expenditure: Meaning, Importance, Classification and Other Details

role of public expenditure in economic development

Thus, mere sovereignty, demands a larger allocation of financial sources for defence preparedness. It will stop the wastage of money and help the auditors to audit the expenditure properly. Therefore, the increase in urbanisation in India has tended to increase the government expenditure. Person who have seen old days in India or have heard about them tell us that there was a time when ghee was selling at four annals a seer whereas now it sells at twenty rupees per kg. Now armament race among the nations is increasing day by day. However, the works is significant in that will definitely enrich and update already existing literature on the subject matter. Social overheads like hospitals, schools and colleges and technical institutions and economic overheads like roads and railways, irrigation and power projects etc.

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Role of Public Expenditure in a Developing Economy

role of public expenditure in economic development

No great war has been conducted in the second half of the twentieth century. It refers to the avoidance of wasteful and extravagant expenditure. Public expenditure is classified into revenue expenditure and capital expenditure. As a result of the increasing urbanisation, the existing towns expand and the new ones come up. Canon of Growth :- The public expenditure should stimulate the production and reduce the poverty. Pubic debt charges: include payment of interest and repayment of principle amount Role of Public Expenditure: Adam smith had concentrated only on passive role of government under which a government can support the smooth flow of economics with least interference in economic activities.

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Impact of Public Expenditure on Economic Growth

role of public expenditure in economic development

On the contrary, in case of boom period public expenditure is incurred in such a way as to increase production and control the rising price-level. Therefore, income of the people will increase. Mukhopadhyay, Partha, Madhabendra Sinha and Partha Pratim Sengupta. It can promote economic development as follows: 1. An uneconomic expansion in public expenditure will result in scarcity of funds, the much-needed growth of the productive sectors will be hampered.

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