A Study on the Fiscal Ramifications of the Rising Public Expenditure of the Central Government of India

Though, public expenditure is an intrinsic instrument of fiscal policy to ensure aggregate fiscal discipline and economic stability and growth, in the Indian context it does not seem to have attained the desired out come. The, unprecedented rise in public expenditure, triggered by the growth of the preponderant revenue expenditure, makes less resources available for the areas which could lead to overall development of the economy and reduces private investments. Declining share of capital expenditure is a threat to sustainable development as it fails to spare funds for the creation of productive capital investment. Again, the predominance of the revenue component questions the quality of expenditure calling for its reprioritisation and rationalisation. The Indian situation is a matter of structural affliction like the Achilles Heel, closely interwoven with the imperial legacy of the British. In Indian scenario, government's non-developmental expenditure is guzzling major chunk of the revenues collected, adversely affecting spending in the areas of human development and infrastructure. Moreover, the expenditure growth is not backed by commensurate growth in revenue, leading it to the inevitable deficit-debt corridor of fiscal maladies. Hence to keep the growth momentum going, the need of the hour is to improve the quality of the expenditure on infrastructure and social amenities of the people through reprioritisation and rationalisation of expenditure and adopting scientific Public Expenditure management practices which would lead to enhanced revenue mobilisation and lessen the intensity of the financial squeeze.