PUBLIC FINANCE: SOLUTION TO ECONOMY DEVELOPMENT

SCOPE OF PUBLIC FINANCE

The scope of public finance may be summarized as under:

        I.            Public Revenue

      II.            Public Expenditure

    III.            Public Debt

   IV.            Financial Administration

     V.            Economic Stabilization

1.      Public Revenue: Public revenue concentrates on the methods of raising public revenue, the principles of taxation and its problems. In other words, all kinds of income from tax and assessment revenue into tax fees and assessment, etc.

2.      Public Expenditure: In this part of finance we study the principle and problem relating to the expenditure of public funds. This part studies the fundamental principles that govern the flow of government funds into various streams.

3.      Public Debt: In this section of public finance, we study the problem of raising loans. The short-fall in its traditional income. The loan raised by the government in a particular year in the part of receipt of the public authority.

4.      Financial Distribution: Now comes the problem of organization and administration of the financial mechanism of the government. In other words, under financial or fiscal administration, we are concerned with the government machinery which is responsible for performing various function of the state.

5.      Economic Stabilization: Now a day’s economics stabilization and growth are the two aspect of the government economic policy which a significant place in the discussion on policy finance theory. This part described the various economic policies and other measures of the government to bring about economic stability in the country.

NOTE: From the discussion, we can say that the subject matters of the public is not static, but dynamic which is continuously widening with the change in the concept of state and functions of the state. As the economic and social responsibilities of the states and increasing day by day, the method and techniques of raising public income, public expenditure and public borrowings are also changing. In view of the changed circumstance. It has given more responsibilities in the social and economic field.   

 

 

 

IMPORTANCE OF PUBLIC FINANCE

1. Steady state economic growth: Government finance is important to achieve sustainable high economic growth rate. The government uses the fiscal tools in order to bring increase in both aggregate demand and aggregate supply. The tools are taxes, public debt, and public expenditure and so on.

2. Price stability: The government uses the public finance in order to overcome form inflation and deflation. During inflation it reduces the indirect taxes and genera expenditures but increases direct taxes and capital expenditure. It collects internal public debt and mobilizes for investment. In case of deflation, the policy is just reversed.
3. Economic stability: The government uses the fiscal tools to stabilize the economy. During prosperity, the government imposes more tax and raises the internal public debt. The amount is used to repay foreign debt and invention. The internal expenditures are reduced. During recession, the case is just reversed.

4. Equitable distribution:

The government uses the revenues and expenditures of itself in order to reduce inequality. If there is high disparity it imposes more taxes on income, profit and properties of rich people and on the goods they consume. The money collected is used for the benefit of poor people through subsidies, allowance, and other types of direct and indirect benefits to them.

5. Proper allocation of resources:

The government finance is important for proper utilization of natural, manmade and human resources. For it, on the production and sales of less desirable goods, the government imposes more taxes and provides subsidies or imposes taxes lightly on more desirable goods.

6. Balanced development:

The government uses the revenues and expenditures in order to erase the gap between urban and rural and agricultural and industrial sectors. For it, the government allocates the budget for infrastructural development in rural areas and direct economic benefits to the rural people.

7. Promotion of export:

The government promotes the export imposing less tax or exempting form the taxes or providing subsidies to the export oriented goods. It may supply the inputs at the subsidized prices. It imposes more taxes on imports and so on.

8. Infrastructural development:

The government collects revenues and spends for the construction of infrastructures. It has to keep peace, justice and security too. It has to bring socio-economic reformation too. For all these things it uses the revenues and expenditures as fiscal tools.