Application of

Wagner’s Law and

Wiseman-Peacocks
Hypothesis
WAGNER’S LAW

● 1883, The law of increasing state spending.

● The law predicts that the development of an industrial
economy will be accompanied by an increased share of
public expenditure in gross national product:

ECONOMIC PUBLIC
GROWTH EXPENDITURE
.
WAGNER’ LAW
- Wagner attributed increased government spending to three reasons :

SOCIAL
PROGRESS.

INDUSTRIALIZA ECONOMIC
-TION GROWTH
WISEMAN-PEACOCK HYPOTHESIS

- Great Britain 1890- 1955 studies the pattern of public expenditure.

- Social disturbance in the economy causes the increase in revenue
collection.
- The successive fiscal activities of the government :
1) Displacement Effect
2) Inspection Effect
3) Concentration Effect.
Application of Wagner’s Law in India

Post Independence public expenditure increased aas india aimed at being a

welfare state. Poverty alleviation and distribution of resources can be seen as a
focus

The inadequate returns on capital outlays and the macroeconomic crisis of early
Nineties arising out of high fiscal deficit shifted the focus of public expenditure
to efficiency to ensure adequate returns and restoring macroeconomic stability.
and prosperity
 Industrialis
Welfare
ation
Current Conditions

· India's GDP grow at 6.98% in 2018-19 in a year when government expenditure

is seen increasing by 8.87%

· Government expediture grew more than GDP between 2007-08 and

2009-10—the peak of the financial crisis

Of course, 2017-18 and 2018-19 have been nothing like the global financial crisis

years, but economic growth has still required a major push from the government.
Critique

Lack of relationship between skyrocketing defence expenditure and economic

growth

Urbanisation and population growth will cause expenditure to rise without it

being directly related to the growth

Agricultural subisidies and economic growth. (WTO)

Welfare state like India had greater growth of expenditure than growth of GDP.
 ➢ Division of public expenditure
CONCLUSION ➢
in different sectors
Policy changes that can be
brought in