Who Controls Public Expenditure? Principles and Types of Public Expenditure
What is public expenditure? Are you aware of the public expenditure of India? Do you know how it works? Who controls public expenditure in India? What are the principles of public expenditure and how does it affect the economy? What are the types of public expenditure? Get familiar with the functionings, the meaning of public expenditure, and know about one of the most debatable topics of economics here.
What is Public Expenditure?
Public authorities such as the Central government, state government, and local governments set aside a sum of money that is to be spent on the needs of the public of a particular country. These are the collective needs of the public that include facilities like infrastructure, basic healthcare, education, pensions, and security.
Public expenditures are a component of public finance that studies the spending, deficits, and taxation made by the government. Public expenditures are fused with public revenues to raise revenues for public welfare, creating a balance in the use of resources.
Public expenditures are supposed to be made for the welfare and well-being of the public and the country in general. It is the responsibility of the government to promote economic growth with an equitable distribution of resources through public expenditure.
One of the major effects of public expenditures includes the redistribution of resources. This ensures that the resources are distributed among the underprivileged classes and a balance is maintained in the economy.
The principles of public expenditure ensure that the government succeeds in maintaining social benefits such as equal production and distribution for the welfare of the public.
The History of Public Expenditure in India
When India became a free country, the policymakers and government decided to adopt a mixed economy model. The functioning of a mixed economy is handled by the government and private sectors. The government takes decisions regarding economic activity in socially important areas while the rest of the areas are open for public undertakings. In India, the government decided to undertake the responsibility of building the infrastructure and capital to promote the economy.
The Effects of Public Expenditure
According to economist Hugh Dalton, public expenditure affects the economy in three main areas. These include production, distribution, and stabilization.
1. Production
Public expenditure affects production based on one’s potential to work and save, the inclination to work and save, and the smart utilization of resources.
- Potential to Work and Save
Public Expenditure provides economic resources that promote work among people. This leads to efficiency and an increase in production, which in turn provides a gateway for the public to save their income for an investment for a better future.
- The Inclination to Work and Save
If the government spends a considerable amount on providing better resources, it would encourage people to access those resources and work towards a goal. This inclination would promote production for a desire for a better lifestyle.
- The Utilization of Resources
The government would thus be investing in resources where the production creates maximum value. This would encourage the unproductive resources to work along with the productive resources to create more opportunities for them. This would lead to increased production value.
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