According to the Musgrave-Rostow theory of public expenditure growth, in the initial stage of economic development, public investment as a share of GDP is:

The Musgrave-Rostow approach explains how the composition and importance of public expenditure change as an economy develops. The evolution can broadly be divided into three stages. Early Stage: During the early stage of development, substantial government investment is required to establish basic economic and social infrastructure. This includes: • Roads and highways • Transport systems • Electricity and power • Water and sanitation • Education • Healthcare • Communication infrastructure Such investment is often called social and economic overhead capital. Private investment may initially be inadequate because these projects involve high costs, long gestation periods and significant external benefits. Therefore, public investment tends to be relatively high. Middle Stage: As economic development proceeds, private-sector investment expands. Government investment increasingly complements private investment by removing infrastructure bottlenecks and supporting industrialisation. Late Stage: In advanced stages of development, the composition of government expenditure increasingly shifts toward: • Healthcare • Education • Social security • Welfare programmes • Redistribution Hence, public investment in socio-economic overhead capital is particularly important during the initial stage of development.