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Friday, 20 May 2011

Main Principles and Role of Public Expenditure in the development of a welfare state

The range of state economics activities has been increased in the modern age.
Following are the main important principles of public expenditure :

1. Canon of Growth :-
The public expenditure should stimulate the production and reduce the poverty . It should not have an adverse effect on the economy.

2. Canon of Social Welfare :-
It is very important principal of public expenditure. The government should spend the money in such a way that it should give maximum benefit to the whole society. The expenditure can not be justified, if one particular class enjoys all the benefits at the expenses of the whole society.

3. Canon of Prior Permission :-
All the public expenditure should be incurred by getting prior sanction from the competent authority. It will stop the wastage of money and help the auditors to audit the expenditure properly.

4. Canon of Economy :-
The government money should be spent in such a manner that there should be no wastage of expenditure. The money collected through takes from the people should not be spent lavishly.

5. Canon of Elasticity :-
Public expenditure should be fairly elastic. It can be increased or decreased according the requirement of the situation. In case of inflation it may be decreased and in case of deflation it may be increased, without disturbance.

6. Canon of Proper Distribution :-
Public spending should not concentrate in any particular class. It should reduce the inequalities of wealth in the country.

7. Canon of Balanced Budget :-
Surplus and deficit both budgets are not appreciative. Surplus budget indicates that heavy taxes are imposed on the people, while deficit budget shows that revenue is less than the expenditure. So all the governments should prepare the balanced budget.

IMPORTANCE OF PUBLIC EXPENDITURE

Following are the main important factors which are responsible for increasing the government expenditure :

1. Welfare of the People :-
Every government is spending a huge amount of money to provide the various facilities to the public. Every government is spending money on medical aid, education, transport and housing facilities to the people. So it has extended the expenditure of the government.

2. Population Pressure :-
In the developing countries birth rate is very high. To provide the basic necessities of life to the population, government has to spend the huge amount of money.

3. Development of Back-Ward Areas :-
Every government is developing its neglected areas, so public expenditure has increased. Every government allocates particular amount every year in the budget to develop these areas.

4. To Increase the Out put :-
Every government is spending money to cultivate the Barron lands and to increase the out put of the country. Because without increasing the growth rate we cannot improve the economics condition of the people.

5. Inflation :-
In the developing countries rate of inflation is very high so their expenditure on goods and services is also increasing day by day.

6. Increase in Administrative Expenditure :-
To maintain peace, security and democracy every government is spending money. Now Terrorism has also increased the growth of public expenditure.

7. Tax Collection :-
As the tax capacity of the people is increasing , government is also spending a huge amount of money on the revenue department. It has also increased the expenditure of the government.

8. Defence Expenditure :-
The defence is main factor which has increased the public expenditure that is defence. Now armament race among the nations is increasing day by day. This expenditure has contributed to the increase in expenditure.

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