General Knowledge - Indian Economy - Discussion

Public expenditure in India basically constitutes capital and revenue expenditure. These are included in central plan expenditure, central assistance and non-development expenditure.

Central plan expenditure is for the allocation of resources in development schemes given in plans of the central government and public sector undertakings. Central assistance is the aids provided for plans of state governments and union territories. Capital defence expenditure, loans for public enterprises, states and union territories and foreign governments fall under non-development capital expenditure. Whereas non-development revenue expenditure consists of revenue defence expenditure, subsidies, postal deficit, administrative expenditure, pensions, debt relief to farmers etc.

All expenditures that promote economic growth and development are termed as development expenditure.

Expenditure on infrastructure development, public enterprises or development of agriculture increase productive capacity in the economy and bring income to the government.

Expenditures in the nature of consumption such as Defence, interest payments, expenditure on law and order, public administration, do not create any productive asset which can bring income or returns to the government are a non-development expenditure.

So, the non-development expenditure are:

i) Interest payments.
ii) Subsidies.
iii) Defence.

@Jeyapriya.

Yes, it is right, that interest payment & subsidies are a non-development expenditure.

Subsidy like subsidy on education loan & other subsidy given by govt. These subsidies didn't make any return, profit, these are just an expenditure for gov. Therefore subsidy comes under non-development expenditure.

Same as with interest payment.

Hope its helpful.

# Non-development Revenue Expenditure.
~ The part of the revenue expenditure that may not contribute to the economic development of the nation is known as non-development revenue expenditure.
~ These include activities such as:
^ Administration of Government Organisations.
^ Maintenance of defence establishments.
^ Interest payments.
^ Subsidies on food, fertilizers, etc.

Defence comes under non developmental expenditure so the answer should also include Defence as non developmental expenditure. Further in my opinion subsidies are provided for the development of the economy to help some particular sector or Industry in its growth then this should also be included in the Developmental expenditure. Can any one please clarify this.

I doubt with the answer as in previous question subsidies has been included in development exp.
Also, the subsidy is being adjusted before calculating national income at market price from available at factor price and vice versa. Interest and defence can be the right answer. As interest is not directly related to growth but anyone clarifies about subsidy?

1, 2 and 3 above are the right answers, because particularly in Defense Sector there is a huge expenditure involved. Secondly paying interest there is no economic development. Lastly payment of subsidy in various fields effect to reverse in economic by which these are the non-development expenditures.

Subsidies and interest payment can be for developmental undertakings also. For example, subsidies on construction materials can lead to structural development, subsidies on new farming technologies can lead to agricultural development etc, likewise interest paid on developmental loans.

Defenses comes under the securities and protection expenditure. In my opinion subsidies are considered as development expenditure because it is provide the government for the financial support.

Yes, it is true that defence, interest payment, subsidies are unproductive whereas irrigation constitutes for the development of crops in the field of agriculture. Hope you convinced.