Fiscal Policy

Public finance or government finance is a field of economics. It deals with
budgeting the revenues and expenditures of government (or public sector). It is about
the identification of and appraisal of the means and effects of government financial
policies. Public finance deals with the financing of the State activities and it discusses
the financial operations of the public treasury. Fiscal economics is another name for
public finance.
The functions of the government were minimal in the early days of the
development of economic philosophy. The economic decisions were guided by
the market forces of demand and supply and the government was not expected to
interfere with the working of the market forces. Earlier governments limited their
activities to a) the maintenance of law and order b) the defence of the country c)
administration of justice d) general administration. The early State was a police State.
Modern governments do not confine their activities to the barest minimum.
Besides the activities performed by the early State, modern governments undertake
a number of growth and development-oriented projects and welfare activities for the
well-being of the people. The modern State is a Welfare State. Therefore there is a
change in the concept of a modern State which is a welfare State. The State has to
mobilize adequate resources for meeting out the ever increasing expenditures, as the
responsibilities and functions of the State have multiplied.
Fiscal economics in the modern days has undergone far-reaching changes.
These changes can also be studied through macro aspects of fiscal policy. It relates
to macro economic functions of the government. It is concerned with the taxation,
public expenditure and monetary policy which affects the overall level of employment
and price level. It may be noted that there is a link between economic theory and the
theory of public finance.

Definition
Economists have defined public finance differently. The following are some of
the popular definitions:
According to Dalton, “Public finance is concerned with the income and
expenditure of public authorities and with the adjustment of the one with the other”.
Findlay Shirras says that, “Public finance is the study of the Principles
underlying the spending and raising of funds by public authorities”.
To quote Lutz, “Public finance deals with the provision, custody, and
disbursement of resources needed for the conduct of public or government
functions”.