explain the reason for an increase in public expenditure
Answers
Explanation:
Some of the main causes of public expenditure growth are: 1. Income Elasticity and Increase in Per Capita Income 2. Welfare State Ideology and Wagner's Law 3. ... The Growth of Transport and Communication 11.....
Reasons for the growth of public expenditure in India:
(i) Development Programmes: Most of the underdeveloped countries have initiated various programmes of economic development i.e. provision of infrastructure of the economy such as transport, communication power etc. This has led to growth of public expenditure.
(ii) Growing trend of Urbanisation: With the spread of urbanization, public expenditure has increased in modern times. Urbanization has led to increase in Government expenditures on civil administration, education, public health, water supply, parks etc.
(iii) Rise in Price-level: As a result of the rise in the price-level, the public expenditure has gone up everywhere. The reason is that like the private individuals the Government also has to buy goods and services from the market at higher prices.
(iv) Increase in Population: As a result, the Government has to incur great expenditure to meet the requirements of increasing population. In fact, the public expenditure increases in the same ratio in which the population increases.
(v) Welfare State: The modern state is a welfare state. It has to spend increasing amounts on such items as social insurance, unemployment, relief, free medical aid, free education etc. to improve the socio-economic welfare of the country.