Public Expenditure and Economic Growth in India

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PUBLIC EXPENDITURE AND ECONOMIC GROWTH WHAT IS PUBLIC EXPENDITURE? MEANING: Public expenditure refers to Government expenditure i.e. Government spending. It is incurred by Central, State and Local governments of a country. Spending by government , municipality, or any local authority. It covers things such as health, education or social services and is funded by tax revenue. It is one of the element that make up aggregate expenditure. Government spending or government expenditure is classified by economists into three main types. Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is classed as government final consumption expenditure.…show more content…
Output is generally measured in terms of GNP. THEORIES RELATED TO PUBLIC EXPENDITURE AND ECONOMIC GROWTH Adam Smith wrote in the 'Wealth of Nations' that the government should restrict their activities to; 1. Defense against foreign aggression. 2. Maintenance of internal peace and order. 3. Public development work. All other functions besides these were considered beyond the scope of the state & expenditure on them was treated as unjust & wasteful. But there had been a spectacular expansion in the functions of state & this resulted in phenomenal increase in public expenditure for this we shall take a look at contribution by Adolph Wagner & Peacock-Wiseman hypothesis. Adolph Wagner's Law of Increasing State Activity Adolph Wagner, the German economist made an in depth study relating to rise in government expenditure in the late 19thcentury. Based on his study, he propounded a law called "The Law of Increasing State Activity". Wagner’s law states that "as the economy develops over time, the activities and functions of the government increase". According to Adolph Wagner, "Comprehensive comparisons of different countries and different times show that among progressive peoples (societies), with which alone we are concerned; an increase regularly takes place in the activity of both the Central Government and Local Governments constantly undertake new functions while they perform both old and new functions more efficiently and more
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