Government expenditure and classification in india

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Categorization of Government Expenditure

The public assistance of the people of India extremely depends on the outgo of the Government of India ( GOI ) . Government outgo is a really of import facet of the authorities ‘s budget presented by the finance curate every fiscal. Through it GOI tries to maximize the public assistance of the people by suitably apportioning economic resources to assorted authorities activities.

Government outgo can be loosely classified into four classs:

Functional Classification or Budget Categorization: In April 1974, the GOI introduced a new accounting construction in order to function the demand of fiscal control and answerability. Under this construction, a five grade categorization has been adopted – sectoral, major caput, minor caput, subhead, and elaborate caputs of histories. Sectoral categorization has clubbed the authorities maps into three sectors, viz. , General Services, Social and Community Services and Economic services. In the new construction, a major caput is assigned to each map and minor caput is assigned to each programme. Each minor caput include activities or strategies or organisations as subheads.

Economic Categorization: Economic categorization of the authorities outgo signifies the manner of the allotment of resources to assorted economic activities. It involves naming the authorities outgo by important economic classs, dividing current outgo from capital outgo, passing for goods and services from transportations to persons and establishments, inter-governmental loans from grants etc. This categorization provides a record of authorities ‘s influence in each sector of the economic system.

Cross Classification or Economic-cum-functional Categorization: Cross categorization provides the break-up of authorities outgo both by economic and by functional caputs. For illustration, outgo on medical installations, a functional caput, is split as current outgo, capital outgo, transportations and loans.

Accounting Categorization: Accounting categorization of the authorities outgo can be presented under ( I ) Gross and Capital ( two ) Developmental and Non-Developmental and ( three ) Plan and Non-Plan. Each categorization of outgo has an aim associated with it. For case, Revenue and Capital outgo indicates the creative activity of assets by authorities outgo and unproductive outgo. Further, the developmental and non-developmental categorization differentiates the authorities categorization as the outgo on societal and community services and economic service from that against general outgo. Similarly, the Plan and Non-Plan outgo represents the outgo on planned strategies of authorities and non-plan outgos.

The above categorization of the authorities outgo serves one or more of the intents of the authorities, such as, parliamentary control over outgo, economic development, monetary value stableness etc.

Analysis of Government Expenditure in India

The chart given below shows the division of authorities outgo in footings of capital and gross outgo for some selected old ages. The per centum portion of gross outgo in authorities outgo has increased over clip due to increase in outgo in society public assistance.

A per centum distribution of the program and non program outgo for a representative twelvemonth of the station and pre reform period each is provided below:

The chart above shows there is a addition in the program outgo over a period of a decennary from 1989-90 to 2008-09.

Sector wise per centum distribution of the composing of the authorities outgo is provided in the tabular array below:

The growing narrative of the India can be said in footings of five twelvemonth programs which give an history of authorities outgo during the programs. The first five twelvemonth program ( 1951-56 ) laid accent on agribusiness, including irrigation and power, wherein the authorities had spent 36 % of its topic on these caputs. The 2nd five twelvemonth program ( 1956-61 ) marks the raid towards industrialisation with an increased authorities disbursement in conveyance and communicating sector with an part of 28.9 % of its outgo. The impulse for industrialisation continues even during the 3rd five twelvemonth pan ( 1961-66 ) with 24 % and 20 % public disbursement on Industry & A ; Minerals, and Transport and Communication severally. Fourth to seventh five twelvemonth programs have societal services of instruction, wellness, public assistance sharing a bulk of the pie with 24 % and 26 % outgo in 4th and 5th program.

The eight five twelvemonth program ( 1992-97 ) commenced the epoch of financial reform and liberalisation. There were increased attempts to better the economic growing and quality of life of the common adult male. There were high public disbursement on the sectors like energy ( 26.6 % ) , Transportation and communicating ( 20.8 % ) and Social and other services ( 19.6 % ) . The Ninth five twelvemonth program ( 1997-2002 ) focussed on the development of substructure by apportioning 72 % of the financess to irrigation, energy, conveyance and communicating and societal service. The ten percent five twelvemonth had an aim of atleast 8 % growing rate by supplying a self-praise to power sector disbursement ( 26.56 % ) and increasing societal & amp ; Community services sector disbursement to 29.27 % .

COMPARISON OF INFLATION BASED ON CPI AND WPI

Consumer Price Index ( CPI ) , is defined as the leaden mean alteration over clip in the monetary values of a basket of the good and services consumed by a consumer. While, Wholesale Price Index is defined as the leaden mean alteration over clip in the monetary value of a basket of sweeping goods. Inflation rate is calculated based on the CPI and WPI as the per centum in the several indices over clip, by and large a twelvemonth.

The computation of rising prices rates based on CPI and WPI organize 1994-95 to 2006-07 is given in the tabular array provided below:

A

WPI

WPI Inflation rate

CPI – Information warfare

CPI- IW Food

CPI-IW Inflation rate

Food Inflation rate

WPI rising prices rate – CPI Inflation rate

1994-95

112.6

12.6

284

304

10.1

11.8

2.5

1995-96

121.6

8.0

313

337

10.2

10.9

-2.2

1996-97

127.2

4.6

342

369

9.3

9.5

-4.7

1997-98

132.8

4.4

366

388

7.0

5.1

-2.6

1998-99

140.7

5.9

414

445

13.1

14.7

-7.2

1999-00

145.3

3.3

428

446

3.4

0.2

-0.1

2000-01

155.7

7.2

444

453

3.7

1.6

3.4

2001-02

161.3

3.6

463

466

4.3

2.9

-0.7

2002-03

166.8

3.4

482

477

4.1

2.4

-0.7

2003-04

175.9

5.5

500

495

3.7

3.8

1.7

2004-05

187.3

6.5

520

506

4.0

2.2

2.5

2005-06

195.5

4.4

542

527

4.2

4.2

0.1

2006-07

206.1

5.4

579

575

6.8

9.1

-1.4

A

A

A

A

A

A

A

A

Base Year for WPI is 1993-94

Base Year for CPI for 1994-95 and 1995-96 is 1982 and from 1996-97 onward it is 1986-87

CPI and WPI differ in footings of their weights assigned to their several component basket goods and services. Food has been assigned a higher weight in CPI ( 46 % in CPI-IW ) as compared to a weight of merely 27 % in WPI. As a consequence, the CPI alterations more with the alteration in the nutrient procedure as compared to the WPI. Further, the fuel group has a much lower weight in CPI ( 7 % on an norm ) relation to that in the WPI ( 14.2 % ) . Consequently, the fluctuations in international petroleum procedure affect the WPI more than CPI. Besides, services are non included under WPI, but are included in the CPI to different extents. Hence, the CPIs are influenced by the service monetary value rising prices.

Sing the information provided in the tabular array above, it can be inferred that on an mean CPI-IW rising prices is higher than that of WPI rising prices. Besides, in footings of WPI rising prices the period from 1994-95 to 1995-94 was of higher rising prices, so the rising prices decreases and increases once more in 2000-01 and so decreases once more. It can be seen that the rising prices rate, both CPI rising prices and WPI rising prices, follows a cyclic form.