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Growth of the Public Expenditures in India and its Impact on the Deficits

Before independence the British government in India was interested primarily in the civil administration and defence of the country. Therefore, a large part of the expenditures of the government was incurred on these services. Things have changed since independence. The total expenditures have increased rapidly because of increasing participation of the government in economic activities. The structure of the government expenditures since the eighties has been mainly influenced by a change in role of the government in the growth process, financing pattern of the deficits and the need for fiscal consolidation. Increasing expenditures of the government have led to an increase in the deficits of the government. Immediate response to economic crisis in 1991 was that of Expenditures compression because it was not easy to mobilize revenues. Fiscal consolidation was brought about by reducing the public expenditures and since then there has been a shift away from plan expenditures accompanied by a reduction in development and capital expenditures.