In order to provide a secure and peaceful environment to its citizens and in order to

provide certain goods and services to them, Governments need to incur expenditure on
internal administration, internal security, internal law and order, a sound judicial
system, external defence of the country and on creating infrastructure of roads etc.
These activities entail substantial financial investments and expenditure. Governments
meet this expenditure partly by levying taxes on its citizens and partly by raising loans.
The financial operations of the Governments with regard to raising and disbursement of
finances are called Public Finance.

Public Finance is the study of the income and expenditure of the State. It deals only with the
finances of the Government. Public finance on the other hand refers to all activities of
government in generating and allocating (spending) revenue towards ensuring efficiency
of the state and the general well-being of the people, that is, financial operation of public
treasury and its implication.