Public expenditure is the spending made by the government on various sectors while performing its regular, developmental and contingent functions with a view to promoting general public welfare.
Following are the major importance of public expenditure:
1. Maintaining law and order: Maintaining law and order and providing
security
is one of the primary duties of the government and for this duty, government
have to spend an significant portion of its revenue on police, army and courts
to enforce law and order and provide security to the people from domestic
violence as well as external aggression.
2. Protection the vulnerable: The government can protect the vulnerable,
poor and marginalized people by making an effective provision of social safety
nets that include health and unemployment insurance, old age allowance,
disability allowance, widow allowance, free education etc.
3. Development of infrastructure: Government have to spend heavily on
social
and developmental infrastructures like education, health, transportation,
communication, electricity, etc. to support economic growth and
development of a nation.
4. Accelerating economic growth: In order to accelerate the rate of
economic
growth the government can directly establish and run public sector industries
or it can spend in infrastructure of development and encourage the private
sector to invest in industrial, agricultural and other productive activities.
5. Maintaining economic stability: Government increases public
expenditure in
times of recession and decrease its expenditure and increases tax rate during
inflationary periods in order to maintain economic stability in a country.
6. Reducing regional inequality: In order to reduce regional inequality,
government diverts its economic and financial resources to backward regions
of the country.
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