Iii public expenditure and economic growth the goals

(iii) Public expenditure and economic growth
The goals of planning are growth and social welfare, which can be
realised only through government expenditure. Consequently, the
government allocates funds to various sectors like agriculture, industry,
transport, communications, education, energy, health, exports, and the
likes with a view to achieve impressive growth. Government expenditure
has been very helpful in maintaining balanced economic growth in the
country. In furtherance of this, government takes keen interest in
allocating more resources for development of backward regions. Such
efforts reduce regional inequality and promote balanced economic
growth. The government propels the growth in an industry by either
increasing its spending in it or supporting it in the forms of subsidies,
lower interest rate for investments etc. For example, the government
through Central Bank had created various funds with differential interest
rates to be disbursed to perceived users with the aim of correcting market
failure thereby growing the economy.
(iv) Public expenditure and distribution
An important aspect of the market mechanism is the inequalities of
income and wealth, which arise on account of nature endowment and
get widened through the institutions of private property and
inheritance. Welfare consideration favours an equitable distribution of
income and wealth since the purpose of economic policy is to attain the
maximum level of social benefits possible. A shift towards equality may
be achieved through various forms of public expenditure, especially
those that are meant to help the poorer sector of the society. For

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instance, items of common consumption may be subsidised and
production of those, which are in short supply, can be taken up by public
sector. Public expenditure on social security and subsidies to the poor
are aimed at increasing their real income and purchasing power.
Expenditure on education, communication and health has a positive
impact on productivity of the weaker section of society, thereby
increasing their income earning capacity.
(b) Principles of public expenditure on the economy
(i) Principle of economy: The resources of the economy are limited relative
to need. Public expenditure is the financial counterpart of the limited
resources, which the government uses directly, or places at the disposal
of certain sections of the society for the purpose of achieving specific
objectives. According to this principle, the use of public expenditure must
not be more than what is just necessary. Utmost care must be taken to
avoid waste of public funds.
(ii) Principle of sanction: According to this principle, no public funds must
be used without proper authorisation and that funds must be applied only
for the purpose for which they have been sanctioned. In a democratic
setting, it is the responsibility of the legislature to sanction expenditure
on demand by the executive authorities. The essence of such a measure
is to prevent unscrupulous and unwanted use of public expenditure, and
hence a check on misappropriation of public fund.