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Types of Expenditure in Budget

  • Last Updated : 02 Nov, 2021

The Union Budget is a framework for the government’s revenue and spending for a fiscal year. The union budget runs from April 1 to March 31 of the following year. Every year the government presents it on the 1st February, in order for it to be implemented before the start of the next fiscal year in April. Union budget is a detailed financial statement that gives the Government’s estimates of revenue sources and projected spending for the year, according to Article 112 of the Indian Constitution. The budget statement contains the Government of India’s expected receipts and expenditures for the Financial Year. The amount of money spent by the government on such expenditures is the expenditure budget.

Expenditure budget:

The Expenditure Budget gives detailed information on the Union government’s overall expenditures for a given fiscal year. This extensive data is divided into two basic categories: 

  1. Capital expenditure and 
  2. Revenue expenditure. 

While the former produces a physical product or investment, the latter mostly consists of operating costs such as labor, pensions, subsidies, and interest. Every ministry and department collaborate to develop a grant request for the expenditures that will be incurred in the coming fiscal year. They also contain any recoveries that will be realized from the upcoming expenditure. Let’s take a look at how the government spends its money:

Major Types of Expenditure:

Defense:

The national debt reflects the cost of defense spending. All of these expenditures must be borne by a nation in order for it to defend itself. Construction, machinery, and equipment such as tanks, naval vessels, and aero-planes are all part of the defense capital investment. According to the ministry of defense, the Narendra Modi government has allotted a budget of Rs 4,78,196 crore for defense expenditure in the current financial year 2021-22, which is 13.73 percent of overall central government expenditure.

Subsidy:

Subsidies are classified as revenue expenditures since they do not diminish the government’s obligation or increase its assets. Subsidies are a sort of government intervention in which the government compensates suppliers for lowering their manufacturing costs. The government encourages producers to increase the output of a good or service by providing subsidies. It aids in the distribution of resources while taking into account the country’s social and economic advantages. Typically, the subsidy is granted to relieve some form of financial hardship. Because it is given to promote a social good or an economic agenda, it is frequently perceived as being in the public’s best interests.

Agriculture:

The government has taken several steps to increase investment in the agriculture sector, including increasing institutional credit to farmers, promoting scientific warehousing infrastructure to extend the shelf life of agricultural produce, establishing an Agri-tech Infrastructure Fund to make farming more competitive and profitable, and developing commercial organic farming, among other things. The government is pursuing different plans to provide farmers in the country with subsidized farm inputs such as seeds, fertilizers, agricultural machinery and equipment, irrigation infrastructure, institutional finance, and so on. As farming provides an opportunity for people in underdeveloped countries to escape poverty. Both in terms of GDP and employment, Agriculture has been the most important sector, it is also very crucial for poverty reduction.

Education:

Education is a critical component of any country’s economic development. Since our independence, India has always placed a high priority on raising our country’s literacy rate. Even now, the government of India operates a number of programs to promote primary and secondary education. More funding also ensures that pupils attend schools with improved facilities and a wider range of curriculum alternatives. Education spending is seen as a human capital investment because it aids in skill-building and hence increases the ability to work and create more as it improves productivity. It has also been discovered that a 1% increase in public education spending leads to a 0.34 percent increase in GDP per capita over time.

Health:

People can avoid diseases and live longer if they receive high-quality health care. The more productive a country’s workforce is, the healthier its citizens are. Despite the fact that healthcare costs are unexpected, it is still necessary to budget for them. Healthcare can help to enhance human capital and increase productivity, boosting economic performance. As a result, analyzing a country’s healthcare spending phenomenon is essential. Overall, public health spending in India has risen from 0.9 percent of GDP in 2015-16 to 1.23 percent of GDP in 2020-21. As a corollary, the health sector’s critical topics include health system enhancement, human resource development, capacity building, and public health regulation.

Finance:

The insurance industry is referred to as the “financial sector.” Insurance services are critical because they contribute to social development by providing necessary security for the country’s wealth and property. Insurance converts collected funds into profit-generating assets. Insurance also contributes to balanced economic growth and advancement by providing loss prevention, financial flexibility, and the facilitation of exchange and trade activities. Insurance converts collected funds into profitable ventures. India’s insurance industry is vital to the country’s economic health. It significantly boosts individual savings prospects, protects their future, and aids the insurance industry in forming a large pool of assets.

Energy:

Shifting from polluting energy sources to clean, locally produced renewable energy preserves people’s health, keeps our air and water cleaner, and increases our economy by providing excellent employment and new opportunities for workers in these sectors. By promoting the use of renewable energy sources like wind, biomass, water, nuclear, and solar, the economy can use its resources wisely. Improving energy efficiency is one of the most cost-effective strategies to lower our overall energy demand and, as a result, the emissions that come with it. India is not energy self-sufficient today. Energy imports in the country total Rs 12,000 crore on an annual basis. Since the Prime Minister’s earlier request for a reduction in imports in 2015-16, India’s annual crude oil production has fallen below 30 million tons (MT). Reliable energy enables expanding industry, modern agriculture, greater trade, and enhanced transportation in these countries.

Women and Nutrition:

Women require adequate nutrition not only to be productive members of society but also because maternal nutrition has a direct impact on the health and development of the future generation. This must be remembered, children who do not obtain adequate nourishment today will suffer permanent, lifelong physical and cognitive deficits. So expenditure in this section is mandatory. Pregnant and nursing women receive meals and counseling through programs like “Anganwadis” which is an example of the government budgeting in this sector. The Union Budget 2021-22, which was announced in Parliament by Finance Minister Nirmala Sitharaman, includes Rs 2,700 crore for child and women’s nutrition.

For the Upliftment of Backward Class:

The Indian Constitution provides protection and safeguards for Scheduled Castes (SCs), Scheduled Tribes (STs), and other marginalized groups. Either specifically or as a means of enforcing its people’s rights in general, to advance their educational and economic interests and eradicate social barriers. The National Commission of SCs, a statutory authority, has also made formalized obligations to these social groups. So whatever plans are made for them are funded through the union budget.

Research and Development:

The money spent on research and development is the money spent on systematic creative activity to grow the stock of knowledge and the use of that information to develop new applications. R&D is usually divided into three categories: Basic research, applied research, and development research. In order for India to become the world’s third-biggest economy, it will need to expand investment in research and development (R&D), and more private sector investment would be critical.

Miscellaneous:

Sport and active recreation participation can bring people from all walks of life together and increase social cohesiveness and inclusion of minorities in other situations. All international training and competition costs are covered by the sports ministry, including participation in the Olympics. NDRF has provided relief, rescue, and evacuation services in the aftermath of every major natural and man-made catastrophe in the nation, including floods, cyclones, earthquakes, landslides, structural collapses, and even certain incidents of radioactive material recovery.

Conclusion:

Through multiplier effects on aggregate demand, high levels of government consumption are likely to boost employment, profitability, and investment. As a result, government spending, even if it is recurring, can contribute to economic growth. The Union Budget’s overall purpose is to promote rapid and balanced economic growth for our country while simultaneously ensuring social justice and equality. The government plans an expenditure based on its goals, then begins assembling resources and cash to carry out the proposed investment. Fees, taxes, interest on loans to states, fines, and dividends from public sector firms are all used to pay the program. The union budget tries to reduce regional inequalities by enacting taxing and spending policies and encouraging the establishment of manufacturing units in impoverished areas. As a result, the government budget is critical in determining a country’s quick growth.


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