The term expenditure describes a payment made in cash or on credit to buy or obtain goods or services. Liabilities incurred in the exchange of commodities or services are referred to as expenditures.
What is Developmental Expenditure?
The expenditure which is related directly to the economic and social development of the country is known as Developmental Expenditure. These expenditures are also known as productive expenditures since they contribute to economic growth by boosting the nation’s production and the real economy. For example, Expenditure on health, social welfare, industrial development, agricultural development, etc. Expenditure on these kinds of services is not a part of the government’s main functioning. Besides, developmental expenditures add to the flow of goods and services in the economy.
What is Non-Developmental Expenditure?
The expenditure incurred on the important general services of the government is known as Non-Developmental Expenditure. It means that these expenditures do not immediately advance the economic and social development of the nation. For example, Expenditure on police, justice, defense, etc. Besides, these expenditures are important from the administrative point of view.
Classification of an expenditure as Developmental and Non-Developmental Expenditure
If an expenditure directly adds to the flow of goods and services of an economy, then it is said to be developmental expenditure.
If an expenditure indirectly contributes to the flow of goods and services of an economy, then it is said to be non-developmental expenditure.
Difference between Developmental Expenditure and Non-Developmental Expenditure
| Basis | Developmental Expenditure | Non-Developmental Expenditure |
|---|---|---|
| Meaning | The expenditure which is related directly to the economic and social development of the country. | The expenditure incurred on the important general services of the government. |
| Impact on Development of Economy | These expenditures have a direct impact on the development of the country’s economy. | These expenditures have an indirect impact on the development of the country’s economy. |
| Objectives | In the case of developmental expenditure, definite objectives are set which can be achieved in a fixed duration of time. | In the case of non-developmental expenditures, it is impossible to set objectives and achieve them in a fixed duration of time. |
| Share of Expenditure | The share of these expenditures is gradually increasing in the economy. | The share of these expenditures is gradually decreasing in the economy. |
| Nature | Developmental Expenditure is productive in nature as it adds to the flow of goods and services. | Non-Developmental Expenditure is not concerned with the working class’s productivity. |
| Example | It includes all the social, community, economic and developmental assistance to the state. | It includes pensions, cost of tax collection, defense expenditure, etc. |
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