Public expenditure

 There are two important aspects of Public Finance, viz., Public Revenue and Public Expenditure, This department of public finance received scant attention at the hands of writers on public finance throughout the 19th century. Attention was almost exclusively focused on public revenues. It is only in the present century that it came to be realized that public expenditure is no less important in its implications and bearing on public welfare than public revenue. The main reason for the early neglect of the subject of public expenditure seems to be that the amount of public expenditure was very small as the field of governmental activity was restricted. Now public expenditure has reached astronomical figures.

In recent times, public expenditure has increased enormously. The main reason is that the functions of the state have increased manifold. In the past, the state was regarded only as a police state concerned with defense from foreign aggression and maintenance of law and order within the State. Now the State is regarded as a Welfare State which is concerned with promoting the welfare of its citizens. As such, it has to provide not only social security but it has also looked to economic stability and economic growth which calls for ever-increasing investment expenditure.