Causes of growth of public expenditure.

Causes of growth of public expenditure in the modern world:

There are some basic causes of ever increasing public expenditure have been mentioned in the theories associated with the issue. However, under the changing of the situation of the modern world, there are many more factors are at work behind the continuous growth of public expenditure.

Causes of growth of public expenditure

The most important causes of growth of public expenditure in India which are the following-

(i) Wagner Law: The German economist Adolph Wagner developed his theory "Law of increasing state activities" towards the end of the nineteenth century. According to him, the main causes of growth of public expenditure is the increasing tendency of the state activity. The law states that there is an inherent tendency for the activities of the government to increase both intensively and extensively. This law is almost universally true in modern times.

 (ii) Growth of population: The growth of population and urbanization is an important factor responsible for the rise of public expenditure in the modern times. This is because as population raises the collectives demand also increases. As a result, the volume of public expenditure increases.

(iii) Rise in price level: With the rise in price level the government has to pay more for the goods and services which it has buy. This contributes to the rise in the money expenditure of the government.

(iv) Welfare activity: Modern government is the welfare government. For this reason the government adopts several socio-welfare activities in order to rise the public general welfare. Such as providing safe drinking water, health facilities, free primary education etc. The implementation of these welfare programmes has raised the volume of the public expenditure.

(v) Rise in defence expenditure: Another major factor responsible for the rise in public expenditure is the raising war tension among the different countries of the world. In order to protect the country from the foreign attract the government of different countries rises the defence expenditure. As a result, the volume of public expenditure has increased.

(vi) Economic planning: Growing importance of the economic planning has contributed to the increased public expenditure. Planning has now become an essential feature of the state functioning in every country especially in the UDCs.

(vii) Maintenance of economic stability: A modern government considers it a part of its duty to check business fluctuations in the economy. Accordingly huge public expenditure is required in the period of recession or depression.

(viii) Establishment democracy: Democratic form of the government is very expensive. The parliament, the cabinet, elections etc. need lot of money. Modern democratic state has to maintain the ceremonial head of the state and make huge expenditure on legislature at Central, state and local levels.

(ix) International factor: Most of the countries are the numbers of international organizations like UNO, IMF, the world bank which implies annual subscriptions, expenses on payment delegates, international conference etc. Moreover, large sums are spent by the government to maintain diplomatic and consular relations with other companies.

(x) Repayment of loans: Another factor responsible for the terrific rise in the volume of the public expenditure is the repay cost of the public loans.

Post a Comment