Expenditure trends and pattern, Microeconomics

Assignment Help:

Expenditure Trends and Pattern:

Total expenditure of the Centre has risen twice as fast as total revenue, although much of this reflects rising interest payments. Revenue expenditure consists of  interest payments, subsidies, public administration, and defence expenditure. The non-plan expenditure of the Central Government forms almost three-fourths of the aggregate expenditure, with the revenue component constituting a significant proportion. The principal non-plan components are  interest payments, defence, subsidies and non-plan grants to States and Union Territories (UTs) on the revenue side, and non-plan loans to States and UTs on the capital side. While the rates of growth in defence and subsidies were contained substantially, the interest expenditure continues to strain Central finances.  

Furthermore, interest expenditure, on an average, absorbed 28.6 per cent of the revenue receipts during the eighties as compared with 46.4 per cent in the nineties. This reflects the mounting pressure on Centre's finances arising out of debt accumulation. Another major item of expenditure which exerted pressure on the Centre's finances is the non-plan loans to States and UTs against small savings. Thus, the earmarking of an increasing proportion of Centre's resources towards meeting non-plan expenditure has resulted in reducing the leverage of the Central Government in directing financial flows towards developmental needs. The inability on the part of the Government to raise larger revenue receipts in view of the growing expenditure commitments constituted yet another structural weakness of the Central finances.  

A rigid distinction between developmental and non-developmental expenditure with regard to their contribution to growth is somewhat difficult since certain non-developmental expenditure items such as expenditure on administrative services also exercise some influence, although of an indirect nature, on economic development. Within the developmental expenditure, the relative importance of social services has increased even though its share in total expenditure has been broadly stable. This outcome is due to a steady decline in the share of expenditure on economic services in total expenditure. There is little doubt that the country's infrastructure remains woefully inadequate. Even then, the Central Government's expenditure on infrastructure as a percentage of total expenditure is on the decline. Expenditure on infrastructure gets broadly classified under the head of capital expenditure. For the Centre, capital expenditure accounted for as little as 23.5 per cent of its overall expenditure, with the rest of the expenditure getting covered under revenue expenditure, accounting for 76.5 per cent of total expenditure. There was a large drop in the Centre's capital expenditure from 2000-2003. From 24 per cent during the early 1990s, it dropped by ten percentage points during 2000-2003. But it has now recovered to its original levels. As far as the Centre goes, 13 per cent of the total share of 17 per cent in GDP goes as revenue expenditure while the remaining 4 per cent gets counted as capital expenditure.   

There is probably little room to cut capital expenditures. Of course, in the future, the private sector rather than the Government should meet most of the enormous infrastructure needs of a growing economy. Further progress is needed in reductions in each of the four main areas of current spending.  


Related Discussions:- Expenditure trends and pattern

Government budget deficits, Government Budget Deficits Governments have...

Government Budget Deficits Governments have been traditionally spending more what they could earn by way of taxes and sale of economic goods and services produced by them. The

Describe primary interests and theory of supply and demand, Part 1 - Sele...

Part 1 - Select a construction-based business of your choice and explain stakeholder theory to illustrate the primary interests of the stakeholder groups and identify any areas o

Economical problems , Look at a recent copy of a newspaper . a. What is...

Look at a recent copy of a newspaper . a. What is the top economic news story? With which of the big questions does it deal? (It must deal with at least one of them and might d

Estimation of national income, ESTIMATION OF NATIONAL INCOME: In India...

ESTIMATION OF NATIONAL INCOME: In India, the first attempt to estimate national income and per capita income was made in the year 1867-68 by Shri Dadabhai Naoroji. This was fo

Emulating the private sector, Emulating the Private Sector: The princi...

Emulating the Private Sector: The principle of corporate governance need be applied to the BW institutions. IMF The most important issue to how to reform the countries

Integrability, explain about integrability problem

explain about integrability problem

Pricing ATM Machines, A bank in a medium-sized midwestern city, Firm X, cur...

A bank in a medium-sized midwestern city, Firm X, currently charges $1 per transaction at its ATMs. To determine whether to raise price, the bank managers experimented with a numbe

The equilibrium consumption combination, The Equilibrium Consumption Combin...

The Equilibrium Consumption Combination equilibrium for the person occurs at the point where the indifference curve, shown by II, is tangent to the budget line, portrayed by BB. T

Subsidies and welfare, Ask question #Minimum 100 areanycurrentsubsidyorwelf...

Ask question #Minimum 100 areanycurrentsubsidyorwelfareissueddiscussedoraddressedinparliamentwords accepted#

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd