What is Government final consumption expenditure (GFCE)?

Economy and Finance

What is Government final consumption expenditure (GFCE)?

28 Aug 2023 Zinkpot 193

The general government final consumption expenditure includes all the government’s current expenditures for purchases of goods and services (including the compensation of employees). It also includes most expenditures on national defense and security but excludes government military expenditures that are part of government capital formation.
It is a government spending on providing services and goods directly for the country. It consists of expenditure on administration, defense expenditure, expenditure on maintenance of law and order, expenditure on social welfare services, education, sanitation, etc.
The Government expenditures are of two types: (a) Current expenditure on goods and services i.e. govt final consumption expenditure and (b) Capital expenditure i.e. public investments.
The Government’s final consumption expenditure is valued in terms of cost to the government since the government services have no market price.
The cost of these services to the government is the sum total of compensation of the employees and the cost of goods and services purchased by the government to provide these services. For example, the cost of defense services comprises wages and salaries paid to military personnel and the cost of military equipment.
Though the government does not sell these services in the market, sometimes it charges a very nominal amount as fees from those individuals who get these services.
For instance, government hospitals take nominal charges from the patients, and government educational institutions charge nominal fees from the students.
Such receipts by the government should be deducted from the total cost of these services to arrive at the net expenditure on these services.