PUBLIC EXPENDITURE
Public expenditure refers to the expenditure incurred by the central, state and
local governments to satisfy the collective wants of the people.
Traditional or classical economists advocated laissez faire policy which restricted the
functions of the government to defence, law and order and civil administration.
Therefore, classical economists gave little attention on public expenditure. During the
Great Depression of 1930s, J.M. Keynes in his book General Theory of Employment
Interest and Money emphasised the importance of public expenditure to attain
economic stability in an economy. In modern welfare states, the governments take
considerable interest in promoting economic development of their respective
countries. Accordingly the importance of public expenditure has also increased.
Canons/Principles of public expenditure
Canons of public expenditure deal with the principles or directions to the government
to enhance the efficiency of public expenditure activities. Following are the important
canons of public expenditure.
1) Canon of Benefit
The first and foremost canon of public expenditure is canon of benefit. This canon
states that expenditure activities of the government, in general, must increase the
well-being of the common people. Every rupee spent by the government must have
the aim of achieving maximum welfare of the society.
2) Canon of Economy
The main aim of this canon is to avoid wastage in public spending. It implies that
public expenditure should be productive by avoiding all duplication of expenditure
and over-lapping of authorities.
3) Canon of Sanction
While undertaking any public expenditure activity, proper prior sanction must be
obtained from the respective authority and amount should be spent on that item for
which it was sanctioned. This canon highlights that there must be proper procedure
for formulating public expenditure policy.
4) Canon of Elasticity
The amount and composition of public expenditure should be elastic in the sense that
it is possible to change in accordance with the circumstances. It is desirable to
increase public expenditure during depression period and reduce it during inflation.
5) Canon of Productivity
Public expenditure must be formulated in such a way that it should promote the
ability and willingness to work, save and invest. It should increase the productive
efficiency of the country so that additional income can be generated
6) Canon of Surplus
The canon of surplus implies that the government should not spend in excess of the
revenue potential of the state. Balanced or surplus budget must be the focus of the
government while formulating the expenditure policies. Modern economists do not
agree with this canon and it is found that deficit budgeting is more useful in
increasing employment opportunities and level of income in under developed
countries.
7) Canon of Equitable Distribution
Government must formulate the expenditure policies in such a manner that it, should
reduce the inequalities in distribution of income and wealth in the economy. Special
attention has to be given to the poor and marginalised sections of people in framing
expenditure policy of the government.
8) Canon of Certainty
This canon implies that public authorities should be very certain and clear about the
amount of expenditure and objective of public expenditure.
