Reasons for increase in Public Expenditure :
(i) Defence expenditure: There has been enormous increase in defence expenditure in India during planning period. India cannot postpone modernization in defence especially when its neighbouring countries are buying the latest defence equipment from developed countries of the world.
(ii) Expansion of Administrative Machinery: There has been an increase in the administrative machinery in the country with the rapid growth of population and also economic development. Heavy expenditure is to be incurred on this in respect of police tax administration, administration of public sector enterprises, etc.
(iii) Building up Strong Economic Infrastructure: Only by building up economic infrastructure, the structure of an economy can be made to improve.
(iv) Debt Servicing: The internal as well as external debt is on the increase. The government has been borrowing heavily from both the markets i.e. domestic and foreign market sources, to meet its expenditure. As a result of which the government has to make huge amounts of money towards interest payments.
(v) Population Growth: During the post 50 years of planning, the population of India has increased. The growth in population requires massive investment in health and education, law and social order etc.
(vi) 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 of which the government expenditure also increased.
(vii) Urbanization: There has been an increase in urbanization. There are more than 23 cities above one million populations which require heavy expenditure on law and order, education etc.
(viii) Industrialization: Setting up key and basic industries requires a huge capital and profit may arise only in the long- run.
