Classification of public expenditure | How public expenditure are classified

Public expenditure are classified differently by different economists from different point of view :-

I) functional classification :- 
Public expenditure are classified on the basis of function for which they are incurred.some government function are defense, agriculture,social welfare, industrial development and infrastructure.

II) Revenue and capital expenditure :-
They are repeated expenditure and incurred each year. It is current expenditure incurred on civil administration, maintenance,defense force,health, education.
Capital expenditure are incurred on building long term projects ,durable assets like highway,dam,irrigation projects. They are one type expenditure and non-recurring.

III) Transfer and Non-Transfer Expenditure:-
This classification was done by pigou. Transfer expenditure are related to those expenditure in which there is no corresponding return. The government does not gets anything in return. E.g pension, unemployment allowance.

Non-Transfer expenditure relates to expenditure which results creation of income or output like- economic infrastructure, social infrastructure e.t c. The government gets rate of return after investing on such expenditure.


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