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Explain various reasons for the growth of public expenditure. - Economics

Answer in Brief

Explain various reasons for the growth of public expenditure.

Explain the various reasons for the growth of public expenditure.

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Solution

Public expenditure refers to the expenditure incurred by the public authority (i.e., Central, State and Local Bodies) for protection of their citizens, for satisfying their collective needs and for promoting their economic and social welfare.

There is a continuous growth in public expenditure in developing countries like India due to various reasons as follows:

  1. Increase in the Activities of the Government: These functions include the spread of education, public health, public works, public recreation, social welfare schemes etc. It is observed that new functions are continuously being undertaken and old functions are being performed more efficiently on a large scale by the government. This leads to an increase in public expenditure.
  2. Rapid Increase in Population: Population of developing countries like India is increasing fast. In 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: Rapid spread of urbanization is a global phenomenon of the day. This leads to an increase in the government expenditure on water supply, roads, energy, schools and colleges, public transport, sanitation etc.
  4. Increasing Defence Expenditure: In modern times, the defence expenditure of the government is increasing even in peacetime due to unstable and hostile international relationships.
  5. Spread of Democracy: 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. Due to this, 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 for implementing various schemes and programmes for industrial development. This results in an increase in government expenditure.
  8. Disaster Management: Many natural and man-made calamities like earthquakes, floods, cyclones, social unrest etc. 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 state’. Hence, there is a continuous increase in public expenditure.
Concept: Structure of Public Finance - Public Expenditure
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APPEARS IN

Balbharati Economics 12th Standard HSC Maharashtra State Board
Chapter 8 Public Finance in India
Exercise | Q 6. (1) | Page 80
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