Managing the spending bulge

Is the post-Covid rise in govt expenditure sustainable?

Governments respond to a crisis in different ways. If the crisis impacts the economy and requires the government to intervene with support measures, the response is often seen in the form of a substantial rise in government expenditure.

The global financial crisis of 2008 saw similar results even for India. The combined government expenditure (including that of the Centre and the states) increased from about 29 per cent of gross domestic product or GDP in 2007-08 to over 31 per cent in 2008-09. It stayed at over 31 per cent for two subsequent years, before settling down at around 29 per