1. Expenditure on defence, to protect the citizens from external aggression

2. expenditure on internal law and order so as to bring about peaceful functioning of economic activities, ,

3. expenditure of government on administrative activities, for bringing about coordination of different economic activities to achieve economic and social welfare, and

4. expenditure on certain amount of infrastructure

development, to help the economy grow. ,
The role of government started increasing with increase in urbanisation and industrialisation. Even in today's economies the economic activities of the government is increasing many

folds. (1) Adolph Wagner a German economists stated that the

government activities whether economic or non-economic starts

Increasing, this results in an increase in the government expenditure,

be due to two aspects (i) increase in more intensive activities of the existing one and (ü) increase in additional extensive

activities. This can be termed as "deepening and widening" of governments' activities so as to achieve certain predetermined

socio-economic objectives,

Public expenditure policy of the government came to the forefront due to the application of Keynesian "functional finance approach", which was an intense success in

pushing the American economy upwards from the great depression. The success of Keynesian theory of pump priming and the application of multiplier effect in accelerating the pace of economic activities, boosted the confidence of many governments to increase the public expenditure and achieve its desired results. This concept has increased the active role of government in a "welfare state" policy which has resulted in an enormous increase in public expenditure. Peacock and Wisenem came to the conclusion after a thorough study that the increase in public expenditure is not smooth but it is of a sudden nature, it increases in jerks and stabilises and so on. v. Peacock and Wiseman explained the growth of public expenditure and its resulting effect, (i) Displacement effect, (ii) Inspection effect and (iii) Concentration effect.
Peacock and Wiseman From 1891 to 1955

carried out the study of public expenditure of the United Kingdom. They were of the opinion that due to certain social disturbances, there can be a sudden jump

or jerk in the increase of public expenditure, This is referred as displacement effect, Generally during war-

time the governments are in immediate need of more expenditure on defence requirements, hence this is a kind of jerk. As the economy stabilises after the increase in public expenditure and the simultaneous increase in taxation by the government, a new fiscal plateau is reached. Here the government is neither interested in reducing public expenditure nor reducing taxes. Hence a new equilibrium is reached. This is referred to as "inspection effect'' as the government will review the situation. Once this situation prevails and economy is settled for some period, this concept may be referred as "concentration effect"

(displacement effect) and after reaching certain point the economy is about to settle, at this point the effect' and once everything becomes normal the concentration effect' takes place.