In recent times, the state’s function has increased manifold which has led to increase in Public expenditure. The change in the role of the state from Police state to welfare state has also led to the expansion of Public Expenditure.
The state, now a days, not only performs its traditional functions such as administrative functions and functions relating to security but to all these, are now added innumerable new functions to fulfil which the state incurs more and more expenditure.
Expansion of public utility services and social services causes huge increase in public expenditure. Public Utility Services like water, electricity, transport services etc are best provided by the state government or local authority and to provide these services huge expenditure is required. Increase in social services like educational facilities, health facilities, old age pension etc has also led to increase in Public Expenditure.
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Another reason which accounts for the mounting public expenditure is the increase in population. According to 2001 census, Indian population had crossed the one billion mark. To cater to the needs of the increasing population the government expenditure is increasing.
Considerable increase in defence expenditure is an important cause of overall rise in the public expenditure. Due to danger of foreign aggression and internal disturbances increasing reliance is placed on defence- military, navy, air force as well as internal forces like police, para military forces, rapid action forces etc.
Increase in Research and Development has also lead to the increase in public expenditure. For instance, although India now boasts to be a nuclear power, the Pokharan blast of 1998 involved a lot of expenditure on the part of the government.
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Anti-unemployment measures undertaken by the government has also led to the shooting up of Public expenditure. To provide employment for all, the state has launched different programmes like NREP, JRY, RLEGP, TRYSEM etc and in the process, government expenditure has increased.
Defective financial and Civil Administration is also a cause for the rising public expenditure. Duplication and unnecessary multiplication of government agencies is not uncommon. Wrong allocation of resources and functions also leads to extravagance. A lax control over public expenditure swells it to a high figure.
With the passage of time, the price level is continuously increasing and the rising cost of every goods and service has led to the swelling of public expenditure. The government have to incur large amounts of money to pay for the goods and services it has to purchase and whose price is continuously on the rise.
Although it is very difficult to determine the optimum amount of public expenditure, it is necessary that whatever expenditure is incurred that would fulfil the basic cannons of expenditure to be of optimum use to society and for economic development.