The Influence of government expenditure on economy is highly important and relationship between these had attracted research interests as early as 1830s. Particularly because, government expenditure has significant impact on economic growth of the country. Hence, this study focuses on influence of the government expenditure on Sri Lankan economy using input-output method. Government expenditure data from 2006 to 2015, input output table 2006 and 2010 were used for the study.
According to the findings, induced impact of government consumption expenditure in period of 2009-2006 was higher than the induced impact of government consumption expenditure in period 2015-2010. Further, Land transport service, Electrical energy and non-petroleum gases, Postal, telecommunication, information services, water had higher induced impact on government consumption expenditure. However, induced impact of government investment expenditure during 2015-2010 was higher than that was during 2009-2006 period. Particularly, induced ratio of government investment expenditure was 2.11 higher and demonstrated increasing trend during 2015-2010 period.
In addition to that, conforming to decomposition analysis technological changes were higher than the demand changes between two periods. Particularly, crude petroleum and other minerals showed excessive technological change between two periods. Moreover, knitted or crocheted fabrics, land transport services also have high demand change in two periods. Further, according to the structural changes in the economy between two period, the relative important of apparel products has changed in 2010. Knitted products more expanded in 2010 as a value-added product of apparels sector rather than general textile products. Hence, Yarn and thread; woven and tufted textile fabrics has high demand as intermediate input of knitted products.