Question

Explain the developmental and non-developmental expenditure of government.

Answer 1

(i) Developmental Expenditure

Developmental expenditure refers to the expenditure of the government which helps in economic development by increasing production and real income of the country.

Developmental expenditure on revenue is divided into developmental expenditure on revenue account and developmental expenditure on capital account.

(ii) Non Developmental Expenditure

It refers to those expenditure of the government which does not directly help in economic development of the country. Cost of tax collection, cost of audit, printing of notes, internal law and order, expenditure on defence etc. are treated as non-developmental expenditure. Pension to retired govt. employees, non-developmental assistance to states are also included in this category.