Relationship between Public Spending and Economic Growth in India

Abstract

Public spending constitutes a fundamental component of fiscal policy and plays a vital role in shaping the economic trajectory of a country. In India, government expenditure has been instrumental in promoting economic development, reducing regional disparities, and improving social welfare. Since the economic reforms of 1991, India has witnessed significant changes in the composition and scale of public spending, reflecting evolving policy priorities and development strategies. The present study examines the relationship between public spending and economic growth in India over the period 1991–2019 using a longitudinal analytical framework.

The study focuses on different categories of public expenditure, including capital expenditure, revenue expenditure, and social sector spending, and evaluates their impact on Gross Domestic Product (GDP) growth. Data have been collected from the Economic Survey of India, Reserve Bank of India reports, and World Bank databases. The findings suggest that productive public spending, particularly in infrastructure, education, and health, has a positive and significant impact on economic growth, while excessive revenue expenditure may limit long-term growth potential. The study highlights the importance of efficient allocation of public resources and fiscal discipline in achieving sustainable economic development.