Governments are big and important in modern times. People depend on their government to protect themselves against external aggression, internal disorders, pollution, epidemics, social injustice, exploitation, unemployment and poverty. Furthermore, a government is expected to: (a) provide educational, medical and housing facilities, (b) build roads, bridges and communication networks, (c) ensure personal freedom and enforcement of contracts, and (d) maintain democratic institutions and cordial relations with foreign countries. Furthermore, present day economies are complex and hence need constant monitoring on the part of the government to deal with such economic problems as inflation, recession, and deficit in the balance of payments. Hence, active participation of the government in the economic life of a country is recognised by economists the world over. Modern governments are equipped with several powers to influence the working of an economy directly and indirectly. A government may participate in economic activities directly by assuming the role of a producer, banker, transporter and distributor. It may influence production and consumption of commodities through regulatory measures during emergencies like a war. Governments can also influence the level and pattern of production and consumption indirectly through fiscal, monetary, industrial and commercial policies. Public economics is the study of government policy from the viewpoint of equity and economic efficiency. It deals with the modes of government intervention and its implications for mobilization and allocation of resources, distributive justice and economic growth in an economy. Hence, the subject involves formal analysis of taxation and public expenditure policies of the government. In addition, it also includes the study of public goods, market failures, externalities and the problem of free-riding. This book, designed for students pursuing undergraduate and postgraduate courses of Indian Universities.