Public Finance deals with the revenue and expenditure activities of the government. In the current era, Public finances have gained immense importance. Because the country's income and expenditure have a profound impact on the country's economic development, people's welfare, economic struggle, and industrial, commercial, and business activities. Apart from this, the government has to take many steps to manage the country, to maintain peace and order in the country and to protect the security and survival of the country, to provide educational and medical facilities for the people, and to develop various sectors. And they have to spend a lot of money. So, in the case of public finance, it is examined which are the sources of income of the government. And what are the expenditure periods? What are the principles and methods used by the government to earn and spend its revenue?
The study of public finance looks at how a government receives revenue from taxes, loans, foreign aid and other sources to meet its developmental and non-developmental expenditures. Apart from this, public finance is also concerned with the principles a government uses to meet its expenditure and the problems it faces.
Definition:
Prof. Harold Groves, whose opinion is given great importance in matters of public finance, defined public finance in these words.
Public finance is the study of how federal, provincial, and local governments manage their revenues and expenditures in modern times. In this regard, these four issues have to be looked at.
- Government Revenue
- Government Expenditure
- Government Debt
- Financial System Management Issues
Government Revenue:
This sector deals with the ways in which the government works to generate the required revenues. What principles of taxation does it apply for this purpose?
Government Expenditure:
This section examines the principles of government expenditure and their impact.
Government Debit:
This section looks at how the government obtains loans from domestic and foreign financial institutions to meet its development needs and how it repays them.
Financial System Management Issues:
Achieving effective results from income and expenditure requires effective management which can only be implemented through effective fiscal policies. The issues of annual budgeting and deficit financing are of great importance in effective fiscal policies.
Importance of Public Finance for a Developing Economy:
Public finances are very important for a developing economy. Because they play an extremely important role in accelerating the pace of economic development to achieve the goal of economic development. One of the main reasons why a developing country is not developed is that its natural production means and resources are not fully utilized due to lack of finance etc. and it does not happen in a private institution or a single person.
Apart from this, developing countries face many other problems. For example, due to a lack of capital, investments are not being made as per the requirement. Savings rates remain very low due to low incomes. Due to the lack of opportunities for technical education and training, human resources are not being fully utilized. Water and energy resources are not being utilized efficiently. The means of transportation and messengers are also underdeveloped and are not benefiting to the desired extent. Public finance can play an effective role in solving all these problems, accelerating the pace of development and freeing the economy from the clutches of backwardness. However, this can only be possible if there is evidence of understanding and prudence in the implementation of government expenditure and revenue policy.
The importance of capital formation and utilization for investment in a developing country is recognized. But because in such a country, there is a general period of poverty and bankruptcy, so the saving power of the people is very less. Apart from this, opportunities for economic equality are less in such a country. Both of these situations can be well helped to overcome with the help of public finance. Because thanks to the tax system, on the one hand, by imposing a gradual tax on the rich, reasonable capital can be obtained, which can be spent on development works, and on the other hand, by imposing a heavy tax on such consumer goods can be discouraged, which is not beneficial to the society as a whole. For example, luxury goods, etc.
The objective of investment before private investors is to get maximum profit, so they try to establish industrial production facilities that can help them to earn maximum profit. In this way, the establishment of industries of national importance cannot be implemented. Apart from this, private investors are not able to turn towards setting up large-scale industries due to limited resources, while such industries are very necessary for the development of the country. Therefore, only the resources of the government can be beneficial for the establishment and development of such industries.
Posted Using LeoFinance Alpha
The government tend to pay less regard to public finance by bysecting it