In recent times public expenditure has become important because it promotes social welfare. In fact, modem government is making welfare states. Public expenditure, thus has become unavoidable for them.
Reasons for Increase in Public Expenditure:
1. Rise in Price-Level: Due to rise in price-level public expenditure has gone up. Individuals and Government have to pay more to buy goods at high prices.
2. Increase in Population: Government has to incur huge expenditure to meet the requirements of increasing population.
3. Increase in Developmental Work: Central and State Governments have to incur heavy expenditure on development work.
4. Expenditure on Internal and External Security: Central Govt has to incur huge expenditure on internal and external security.
5. Expenditure on Welfare State: Huge expenditure is incurred on welfare items like socialinsurance, free medical aid, free education etc.