2.1.4. Productive and Unproductive Expenditure

Productive Expenditure - Expenditure on infrastructure development, public enterprises or development of agriculture increase productive capacity in the economy and bring income to the government. Thus they are classified as productive expenditure. Example – expenditure on physical assets like machineries etc. or expenditure on human capital – training etc.

Unproductive Expenditure - Expenditures in the nature of consumption such as defence, interest payments, expenditure on law and order, public administration, do not create any productive asset which can bring income or returns to the government. Such expenses are classified as unproductive expenditures. Example – maintenance of law and order, defence etc.