Public Spending in India : Pre-Reform Study

The central focus of this book is on an enquiry into the trends and patterns of public expenditure in the pre-reform period. The pre-reform period is chosen for the study as it was characterised by the dominant role of public sector in India's planned process of development. Thus, there had been strong impulses for significant growth in government expenditure. However, the over expansion of public sector propelled unbridled growth in the public consumption expenditure without needed increase in public revenue. This set the stage for fiscal imbalances which ultimately culminated into fiscal crisis of enormous magnitude. With a view to deal with fiscal crisis, especially crisis in the public sector reform measures were initiated. Thus, it is of immense importance to study the underneath dynamics of growth in public expenditure in the pre-reform era. After providing an analytical discussion about the normative and positive theories of government expenditure, the book examines the dichotomous structure of government expenditure and the growth of defence and human development expenditures by the government. Most importantly, the macro econometric analysis of government expenditure has been carried out with a view to arrive at concrete results. The core finding of the study is that the 'Wagner's Law' holds valid in the pre-reform period implying an expansionary public spending policy stance.