User:Anu2033/public expenditure

Public Expenditure

Public expenditure can be defined as,

“ The expenditure incurred by public authorities like central, state and local governments to satisfy the collective social wants of the people is known as public expenditure. ”

It is basically spending made by the government of a country on citizens' needs on items such as pension, provision, infrastructure etc. Public expenditure was restricted only to a small extent till 19th century due to laissez faire followed by the government, as classical then believed money left in private hands could bring better returns. It was only in 20th century when John Maynard Keynes pointed out the important role of public expenditure in determining the level of income and distribution in the economy. Since then government’s expenditure as shown an increasing trend

Causes of growth of public expenditure

Even though public expenditure came into picture in 20th century, accelerating growth of government expenditure began in late 70s.

There are several factors that have lead to enormous increase in public expenditure through the years

• Defense Expenditure-due to modernization of defense equipment by navy, army and airforce to prepare the country from war or for prevention.

• Population growth- It increases with the increase in population, more of investment is required to be done by government on law and order, education; infrastructure etc. investment in different fields depending on the different age group is required.

• Welfare activities- women welfare, mid day meals, pension provisions etc.

• Provision of public and utility services-provision of basic public goods given by government (their maintenance and installation) such as transportation.

• Accelerating economic growth- in order to raise the standard of living of the people.

• Price rise- higher price level compels government to spend increased amount on purchase of goods and services.

• Increase in public revenue- with rise in public expenditure government is bound to increase the public expenditure.

• International Obligation- maintenance of socio economic obligation, cultural exchange etc. (these are indirect expenses of government)