2.1.3. Direct Expenditure and Transfer Expenditure

Direct Expenditure - The direct or non-transfer expenditure relates to expenditure which results in creation of income or output. Basically it is an expenditure by government on the purchase of goods and services and on current services of factors of production.

The non-transfer expenditure includes development as well as non-development expenditure that results in creation of output directly or indirectly. Economic infrastructure such as power, transport, irrigation, etc.; Social infrastructure such as education, health and family welfare; Internal law and order and defence; Public administration, etc.

By incurring such expenditure, the government creates a healthy conditions or environment for economic activities. Due to economic growth, the government may be able to generate income in form of duties and taxes.

Transfer Expenditure - Transfer expenditure relates to the expenditure in the form of payments against which there is no corresponding return. Such expenditure includes public expenditure on - National Old Age Pension Schemes, Interest payments, Subsidies, Unemployment allowances, Welfare benefits to weaker sections, etc.

By incurring such expenditure, the government does not get anything in return, but it adds to the welfare of the people, especially those belonging to the weaker sections of the society. Such expenditure basically results in redistribution of money incomes within the society.