Economics [3 marks Question-Answer]

Following are the main reasons behind consistent growth of public expenditure in India.
(1) Development Projects : In India, we have taken up a large variety of development projects under the five year plans. This has led to increase in public expenditure.
(2) Increase in Population : The growth of population has necessitated the expenditure on providing transport and communication facilities, educational institution, health facilities etc. This has led to a huge growth of public expenditure in recent years.
(3) Increasing Defence Expenditure : Government has to spend more and more on providing internal security to its people
(4) Rise in price level : As a result of rise in the price level, public expenditure has gone up very high. The reason is that the government has to purchase various goods and services from the market at higher prices.

Significance (or Role) of Public Expenditure in Economic Development :
Public expenditure is important from the following angles :
1. Increase in Aggregate Demand : Public expenditure increases aggregate demand for goods and services which in turn raises the level of output. It generates income in the economy which creates more demand.
2. Redistribution of Income : Through its various expenditure programmes, the government can redistribute national income and reduce inequalities in the distribution of income.
3. Larger Employment Opportunities : Public expenditure on economic and social infrastructure provides larger employment opportunities and raises the productive capacity of the economy.

Developmental Expenditure : Developmental expenditure is that expenditure which is incurred on economic and social development of the country.
Example : Expenditures on the development of agriculture, industries, health, education, etc.
Non-developmental Expenditure : Non-developmental expenditure is that expenditure which does not promote economic development.
Example : Expenditure on administrative services like police, defence, administration of justice, general administration etc.