Question

Explain various reasons for the growth of public expenditure.

Explain any four reasons for the growth of public expenditure.

Explain the reasons for the growth in public expenditure in India.

Answer 1

It is observed that there is continuous growth in public expenditure in a developing country like India. Let us study some of the important reasons:

1. Increase in the activities of the Government: As mentioned earlier, the modern government performs many functions for the social and economic development of the country. These functions include the spread of education, public health, public works, public recreation, social welfare schemes, etc. It is observed that the government is continuously undertaking new functions and performing old functions more efficiently on a large scale. This leads to an increase in public expenditure.
2. Rapid increase in population: The population of developing countries like India is increasing fast. In the 2011 Census, it was 121.02 crores. As a result, the government has to incur greater expenditure to fulfil the needs of the increasing population.
3. Growing urbanization: The spread of urbanization is a global phenomenon of the day. This leads to an increase in government expenditure on water supply, roads, energy, schools and colleges, public transport, sanitation, etc.
4. Increasing defence expenditure: In modern times, government defence expenditure has been rising even in peacetime due to unstable and hostile international relations.
5. Spread of democracy: The majority of the countries in the world are democratic in nature. A democratic form of government is expensive due to regular elections and other such activities. It results in an increase in the total expenditure of the government.
6. Inflation: Just like a private individual, the government has to buy goods and services from the market for the spread of economic and social development. Normally, prices show a rising trend. As a result, the government has to incur increasing costs.
7. Industrial development: Industrial development leads to an increase in production, employment, and overall growth in the economy. Hence, the government makes huge efforts to implement various schemes and programmes for industrial development. This results in an increase in government expenditure.
8. Disaster management: Many natural and man-made calamities, such as earthquakes, floods, cyclones, and social unrest, are occurring more frequently. The government has to spend a huge amount on disaster management, which increases total expenditure. Modern governments are working for ‘welfare states’. Hence, public expenditure continues to increase.