Volume 2, Number 4, October – December’ 2013 ISSN (P):2279-0918, (O):2279-0926 International Journal of Entrepreneurship & Business Environment Perspectives © Pezzottaite Journals. 627 | Page RELATIONSHIP BETWEEN ECONOMIC GROWTH AND PUBLIC EXPENDITURE THROUGH WAGNER’S LAW: AN ANALYTICAL STUDY IN INDIAN PERSPECTIVE Dr. Dhiresh Kulshrestha 5 ABSTRACT Every government also tries to avoid the condition of fiscal deficit and to control their Public Expenditure and Revenue. In this order, fiscal policy is the center point of development, which is the fundamental instrument to control the trade cycle in the economy. Fiscal policy has considered a center stage in policymaking. A striking feature of public expenditure in India is its continuous increase since independence. The Indian Government fiscal policy is in the center of the debates that is related to expenditure and revenue pattern of the government. Fiscal Policy should control their public expenditure and invest it in a proper direction so that faster, more inclusive and sustainable growth might be achieved according to the strategy of 12th five-year plan. However, in real, in India, many times continuously increase in fiscal deficit with reduction in growth (GDP) has observed. KEYWORDS GDP, Economic Growth, Public Expenditure, Government Expenditure, Real Per-Capita Government Expenditure etc. INTRODUCTION Public expenditure incurred by public authorities like central, state and local governments to satisfy the collective social wants of the people is known as public expenditure. Public expenditure is required to promote rapid economic development, trade and commerce, agricultural and industrial sectors, rural development, balanced regional growth, full-employment and maintain price stability, mineral resources like coal and oil, socio-economic overheads eg. Roadways, railways, power etc. and to ensure an equitable distribution of the resources. The first question comes in the mind, Does the Indian economy Support Wagner’s Law in present scenario? In this paper discussed about the six versions of Wagner’s Law, these versions (from 1961-1980). Six versions of Wagner’s law Different versions of Wager’s hypothesis have been empirically investigated in functional form since the 1960s as shown below: The earliest and simplest version of this law was given by Peacock and Wiseman in1961 by using the following double log equation from which the elasticity of estimates was derived. According to them, growth in Real Government expenditure (RGE) is dependent upon the growth in real GDP. Therefore, this function shows that Government Expenditure (GE) is a function of Gross Domestic Product (GDP). Where, LGE is log of Government Expenditure, LGDP is log of Gross Domestic Product (GDP), a1 is Intercept (constant), b1 is Coefficients of LGDP. The equation shows the positive relationship between LGE (dependent variable) and LGDP (independent variable), i.e. total government expenditure increases due to an increment in gross domestic product. Further, Gupta in 1967 used different model to test the validity of Wagner's law with the effect of increase in Population (P). According to him, growth in Real per-capita government expenditure (RGE/P) is dependent upon the growth in real GDP per capita (RGDP/P). 5 Associate Professor, Department of Economics, Central University of Haryana, Haryana, India, drdhireshkulshrestha@gmail.com