Economics Uncategorized

Fiscal Economics


The term ‘Fiscal Economics’ is a new one; the old and popular term of the subject is ‘Public Finance’. The subject Public Finance is related to the financing of the State activities and it discusses the financial operations of the Government treasury. The term fiscal is derived from Greek word which means basket and symbolizes the public purse. Hence the subject ‘Public Finance’ has been newly termed ‘Fiscal Economics’.
Public Finance studies the manner in which the state raises and spends the resources. The state is concerned with the collective wants of the citizens. The modern state is a welfare state. The activities of the state have increased extensively and intensively. To perform these activities, the state needs funds. This chapter deals with the Public Revenue, Public Expenditure, Public Debt, Budget,Federal Finance and Local Finance.

Meaning of Public Finance:

Public finance is a study of the
financial aspects of Government. It is concerned with the revenue and expenditure of the public authorities and with adjustment of the one to the other.


“Public finance is one of those
subjects that lie on the border line between Economics and Politics. It is concerned with income and expenditure of public authorities and with the adjustment of one to the other”.
~Huge Dalton

“Public finance is an investigation
into the nature and principles of the state revenue and expenditure”.
~Adam Smith

Subject Matter / Scope of Public Finance:

In Modern times, the subject ‘PublicFinance’ includes five major sub-divisions,viz., Public Revenue, Public Expenditure,Public Debt, Financial Administrationand Fiscal Policy.

1. Public Revenue: public revenue deals with the methods of raising public revenue such as tax and non-tax, the principles of taxation,rates of taxation, impact, incidence and shifting of taxes and their effects.

2. Public Expenditure: This part of studies the fundamental principles that govern the Government
expenditure, effects of public expenditureand control of public expenditure.

3. Public DebtPublic debt deals with the methods of raising loans from internal and external sources.The burden, effects and redemption of public debt fall under this head.

4. Financial Administration This part deals with the study of the
different aspects of public budget. The
budget is the Annual master financial plan of the Government. The various objectives and steps in preparing a public budget, passing or sanctioning, allocation evaluation and auditing fall within financial administration.

5. Fiscal PolicyTaxes, subsidies, public debt and public expenditure are the instruments of fiscal policy.

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