Abstract

This study examines how public expenditure mix and institutional quality affect economic growth in developing nations. Public expenditure is often seen as a key fiscal tool for economic growth, especially in nations with structural constraints, weak private sectors, and poor infrastructure. Theoretical and empirical literature disagrees on whether government spending sustains economic growth. The qualitative study uses peer-reviewed academic papers, textbooks, policy studies, government publications, and relevant news articles. A topical synthesis of research focuses on capital and recurrent expenditure, transmission mechanisms, and institutional issues affecting fiscal effectiveness. Endogenous growth theory provides the analytical framework for understanding how public investment in human capital and infrastructure boosts long-term growth. When invested in productive areas like infrastructure, education, and healthcare, public investment boosts economic growth. The success of such expenditure depends on governance, budgetary discipline, and resource allocation efficiency. In many emerging nations, large recurring expenditure and institutional inefficiencies reduce government spending’s growth potential. According to the report, properly allocated public spending and strong institutions maximise effectiveness. The report suggests additional capital investment, better public financial management, accountability, and project monitoring. It emphasises the need of public-private partnerships in addressing fiscal constraints and expanding development finance in developing nations.