Fiscal Policy-Public Expenditure

Fiscal Policy-Public Expenditure Hey Mumbai University SYBA IDOL students!  Today, we’re diving into the fascinating world of Economic Public Finance , exploring the chapter – “Fiscal Policy-Public Expenditure“. We’ll start by defining public expenditure and discussing its objectives and importance. Public expenditure refers to the money spent by the government on various activities and services. Understanding why and how this spending is important helps us see how it impacts our economy and society. Next, we’ll explore the Canons of Public Expenditure. These are principles that guide how public money should be spent to ensure it is used effectively and fairly. Then, we’ll look at the classification of public expenditure. We’ll break down the different types of public spending, such as capital and revenue expenditures, and understand their roles and impacts. We’ll also examine the causes of rising public expenditure in the modern era. This will help us understand why government spending has increased over time and what factors contribute to this rise. Additionally, we’ll discuss the effects of public expenditure on production and distribution in the economy. We’ll see how government spending influences economic activities and the distribution of resources. Finally, we’ll look at how public expenditure can be used as an effective instrument of fiscal policy. We’ll explore how governments use spending to achieve economic goals and manage the economy. So, SYBA IDOL Mumbai University students, get ready to unwrap the mysteries of “Fiscal Policy-Public Expenditure” with customized IDOL notes  just for you. Let’s jump into this exploration together. Question 1:- What is Public expenditure? Explain its objectives and importance  Introduction:      Public expenditure refers to the money spent by government authorities at the central, state, and local levels to meet the needs and wants of the public. This spending aims to improve the well-being of society by investing in various areas such as infrastructure, education, healthcare, and social security.  Objectives of Public Expenditure: Provision of Social Wants: The primary goal of public expenditure is to maximize the welfare of the community by providing necessary services and infrastructure. This includes building schools, hospitals, and other facilities that improve the quality of life. Investment for Economic Growth: Governments spend money to ensure that there is enough investment to keep the economy growing and to maintain full employment. This spending helps stimulate economic activity and supports growth. Infrastructure Development: A significant part of public spending goes into developing infrastructure such as roads, bridges, and utilities. This infrastructure is essential for economic development and improves the overall quality of life. Income and Wealth Distribution: Public expenditure helps in achieving a fair distribution of income and wealth. By spending on various social programs, the government can help reduce inequalities and support low-income groups. National Security: Spending on national security and defense is crucial for maintaining the safety and sovereignty of a country. This includes funding for the military and other security measures. Law and Order Maintenance: To ensure peace and stability within the country, the government spends money on maintaining law and order. This includes funding for police forces and judicial systems.  Importance of Public Expenditure: Economic Development: Public expenditure is vital for economic development as it builds infrastructure and supports sectors like agriculture and industry. This investment helps boost the overall economy. Social Welfare: Government spending on social services such as education, healthcare, and welfare programs improves the quality of life for individuals and promotes social fairness. Employment Generation: Investments in public works and infrastructure projects create jobs. This helps reduce unemployment and increase income levels in the economy. Stabilization of the Economy: During economic downturns, public expenditure can be used to stabilize the economy. By increasing spending, the government can help stimulate demand and economic activity. Redistribution of Income: Through targeted spending on social programs, public expenditure can help reduce economic inequalities. This spending supports disadvantaged groups and helps to balance income distribution.  Conclusion:     Public expenditure is a crucial aspect of fiscal policy that addresses immediate social needs and supports long-term economic growth. By investing in infrastructure, social services, and security, the government plays a key role in promoting economic development, social welfare, and overall stability. Question 2 :- What are the Canons of Public expenditure?  Introduction:     The canons of public expenditure are important guidelines that help government officials decide how to spend public money. These principles are designed to ensure that government spending is effective, efficient, and serves the best interests of society. They help in making sure that public funds are used wisely and achieve their intended goals. Canon of Economy Definition: The Canon of Economy stresses the need to spend public money as efficiently as possible. Explanation: This means avoiding unnecessary spending and making sure that every rupee spent provides the highest possible benefit. The aim is to prevent waste and ensure that resources are used wisely. Importance: It helps in avoiding extravagance and ensures that public funds are used to achieve the greatest good without negatively affecting production or economic growth. Canon of Sanction Definition: The Canon of Sanction requires that no public money should be spent without proper approval from the relevant authorities. Explanation: This ensures that funds are used for their intended purposes and not misused. It also involves proper auditing and oversight to prevent misuse and ensure accountability. Importance: It helps in maintaining transparency and ensuring that public expenditure is monitored and controlled. Canon of Elasticity Definition: The Canon of Elasticity suggests that public spending should be flexible and able to adapt to changing circumstances. Explanation: This means that government spending should be adjustable based on economic conditions and needs. It allows for varying levels of expenditure in response to different situations. Importance: It ensures that public expenditure can effectively respond to economic changes and evolving needs of the society. Canon of Surplus Definition: The Canon of Surplus states that government spending should ideally lead to increased production, employment, and income. Explanation: The goal is for public expenditure to generate positive economic effects, such as higher production levels and more jobs, which contribute to overall economic growth. Importance: It ensures that public spending has a beneficial impact on the economy, leading to