Rethinking Expenditure Classifications in India: Beyond the “Non-Developmental” Paradigm
DOI:
https://doi.org/10.31305/rrijm.2025.v10.n12.001Keywords:
Public Expenditure Classification, Fiscal Policy India, Development vs. Non-Development Expenditure, Functional Expenditure, Outcome Budgeting, Sustainable Development Goals (SDGs)Abstract
This paper critically examines the traditional classifications of government expenditure in India, particularly the separation between “developmental” and “non-developmental” spending. Introduced during the early planning era, these categories reflected the priorities of centralized economic planning but have since become inadequate in a welfare-oriented, rights-based, and Sustainable Development Goals (SDG)-driven governance framework. The paper argues that the term “non-developmental expenditure” carries normative bias, undervalues essential governance and welfare functions, and is inconsistent with international standards such as the IMF’s Government Finance Statistics (GFS) and the UN’s Classification of the Functions of Government (COFOG). It highlights how such outdated classifications distort policy debates and hinder evidence-based fiscal analysis. The paper then reviews recent Indian expenditure reforms—including the abolition of Plan/Non-Plan expenditure, the Fiscal Responsibility and Budget Management (FRBM) Act, and outcome budgeting—and explores state-level innovations such as SDG-linked and programme-based budgeting. It concludes by advocating for modern, functional, and outcome-oriented frameworks of classification that align with global practices and better capture the multidimensional goals of fiscal policy in contemporary India.
JEL Codes: H50, H61, H72, O23.
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This is an open access article under the CC BY-NC-ND license Creative Commons Attribution-Noncommercial 4.0 International (CC BY-NC 4.0).
