SOAS Research Online

Abstract

Of the many different ways in which economists have tried to analyse public expenditure, the most relevant to Indian economic development is that which links the level of public spending with the rate at which the state can accumulate capital. The abstract theory of this link, however, must be complemented by an historical account of the degree to which a state accumulation policy was understood by Indian policy makers, and of the other (often inconsistent) elements in the economic strategy of Indian nationalism. After attempting to provide accounts both of the abstract theory and of the institutional and policy context within which it was applied, the thesis analyses original empirical data on public expenditure in India between 1960 and 1970. The real growth rate of public expenditure, its functional and economic composition at the all-India level are presented, and the strong contrast in the patterns of the first and last five year periods is elucidated. The effect of the 1965-7 droughts and bad harvests in producing this contrast is assessed. At a more disaggregated level, studies are made of changes in the degree of centralization of public expenditure, public capital formation and public saving. Differences between individual states in their rates of growth of real public expenditure, public capital formation and public saving are also examined, and possible explanations considered. The public expenditure data is argued to be consistent with a specific view of the way state accumulation took place within the context of the Indian nationalist economic strategy. The thesis proposes that the attempt to create a "modern" structure of output, without using foreign trade to divorce domestic production from domestic demand, and without control over domestic demand either, was superimposed on the basic task of state accumulation and made its achievement progressively more difficult.