Public expenditure in India is broadly categorised as (1) development and (2) non-development expenditure.
Within development (or developmental) expenditure, we make a distinction between revenue and capital expenditure and also between plan and non-plan expenditure.
1. Developmental Expenditure:
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The important heads of developmental expenditure within the revenue account are (i) social and community services, (ii) economic services and (iii) grants- in-aid to states and union territories. The largest component in this group is economic services.
Economic services include general economic services, agriculture and allied services, industry; and minerals, water and power and power development, transport and communication, railways, post and telegraphs etc.
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The components of development expenditure on capital account are: (i) loans and advances to states and union territories, (ii) loans for social and community development services and (iii) loans for economic services.
2. Non-development:
Non-development expenditure on revenue account is divided into two classes, (i) the general services and (ii) the grants-in-aid to states and union territories and also to other countries.
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The general services include fiscal services, interest payments, administrative services, defence; services etc. The largest two components of non-development expenditure on revenue account have been defence services and interest payment on public debts.
The components of non- development expenditure on capital account are (i) loans and advances to states and union territories] and (ii) advances to foreign countries. So we learnt that:
1. Public expenditure can be studied under (a) developmental and (b) non-developmental expenditure.
2. Within the developmental expenditure, there are two accounts like (i) revenue account and (ii) capital account.
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3. The developmental expenditure within the revenue account include social and community services, economic services and grants-in-aid to states and union territories.
4. The largest component of developmental expenditure within the revenue account is economic services.
5. Expenditure on economic services include expenditure on agriculture and allied services, industry and minerals, water and power development, transport and communication, railways, post and telegraphs etc.
6. The developmental expenditure on capital account includes loans and advances to states and union territories, loans for social and community development services and loans for economic services.
7. Similarly, within the non-development expenditure, there are two accounts like revenue account and capital account.
8. Non-development expenditure on revenue account include (i) general services consisting of fiscal services, interest payments, administrative services, defence services etc and (ii) grants- in-aid to states and union territories and also to foreign countries.
9. Non-development expenditure on capital account includes loans and advances to states and union territories and advances to foreign countries.
10. The biggest components of non-development expenditure have been (i) the defence services and (ii) interest payments on public debt.
Public expenditure is classified as developmental and non-developmental expenditure. There are two accounts like revenue account (revenue expenditure is done from revenue account) and capital account (capital expenditure is made from capital account).
Developmental expenditure has both revenue and capital accounts and non-developmental expenditure has also both revenue and capital account.