Main menu


Why government expenditures is increasing ?

Government expenditure is also known as public expenditure. Revenue collected by the government has to be spent on the administrative and development purposes of the country. it plays an important role in the economic development of a country.

Government expenditure

Causes of increase in government expenditure in Modern Times

1. Rapid growth of population

The growth in population required massive investment in health and education, law and social order, etc. A young population required increasing expenditure on education and young service, while the aging population requires transfer payments like old-age pension, social security, and health facilities.

2. Defence expenditure

There has been an enormous increase in defense expenditure in Modern Times. The defense expenditure has increased tremendously due to the modernization of defense equipment used by the Army, Air Force, etc.

3. Increase in national income

The increase in national income also resulted in more income to the government by way of tax revenue and other income. As a result, government experiment also increases. the government is not only expected to expand its traditional activities but also has to undertake new activities.

4. Government subsidies

The government has been providing subsidies on the number of items such as food, fertilizers, exports, education, etc. Because of the massive amount of subsidies, public expenditures have increased.

5. Debt Servicing

The internal Debt, as well as external Debt, is on the increase. The government in developing countries borrows having Li both from the domestic market and from foreign sources, to meet its expenditure. As a result of which, the government has to make a huge amount of money towards interest payments.

6. Expansion of Administrative machinery

There has been an increase in the administrative machinery in the country over time. Heavy expenditure is to be inquired on police, text administration, administration of public Enterprises, etc.

7. Development project

The government in developing countries has to undertake various development projects such as irrigation, iron and steel, heavy machinery, power, telecommunications, etc. The development projects require a lot of capital and revenue expenditure.

8. Industrialization

Setting up key and basic industries require huge capital and profit may arise only in the long run. It is the government that starts such industries in a planned economy. The public sector has to create a strong infrastructure as a support base for the industrial sector by investing huge capital.

9. Economic incentives

Economic in Such as subsidies, cheap credit, tax concession, cheap electricity, etc. given by the government to the agriculturists and industrialists have caused a monetary burden on the government. While recovery is in respect of both economic and social services have been insignificant.

10. Welfare state ideology and Wagner's law

The modern state is a welfare state. It aims at promoting the economic, political, and social well-being of its citizens. It makes every effort to improve the living standard of the common people. For this purpose, it has to undertake many functions and services never visualized before.


Contents in this page