Development expenditure, fiscal consolidation and public revenue in India

Following challenges with increasing fiscal deficit, the Government of India adopted the path of fiscal consolidation with the sole intention of reducing fiscal and other deficits. However, in the drive to reduce government expenditure, it is necessary to be cautious of how it affects expenditures such as development expenditure that are very essential to the well-being of people. This study therefore investigated how fiscal consolidation and Public revenue affect development expenditure in India using time series data from 1977-2015 and the ARDL model. The study found that, in both the short run and long run, public revenue had a positive significant impact on development expenditure whiles fiscal consolidation had a negative significant impact on development expenditure. The study therefore recommended that in our attempt to attain fiscal consolidation, care must be taken not to abandon development expenditure which has serious effects on the well-being of people.