Download Nature and Scope of Public Finance

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Public finance is about the taxing and spending
activities of the government.
Also known as “public sector economics” or “public
economics.”
Focus is on microeconomic functions of government –
polices that affect overall unemployment or price
levels are left for macroeconomics.
Scope of public finance unclear – government has role
in many activities, but focus will be on taxes and
spending.
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The study of public finance relates to financial activities of
the government including the financial activities central govt.,
state govt. and local govt.
Public and Private Finance
Public finance is concerned with the economic activities of
the govt.
Private finance is related to finance of a person
The study of public finance relates to financial activities of
the government including the financial activities central govt.,
state govt. and local govt.
Public and Private Finance
Public finance is concerned with the economic activities of
the govt.
Private finance is related to finance of a person
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The subject matter of public finance can be divided into
following parts:
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1) Theory of public Revenue – This branch of publics
finance is related to the study of all those sources through
which a govt. earns revenue. In it ,various sources of govt.
income , such as taxes, public dbt and deficit financing are
studied.
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2) Theory of Public Expenditure – Problems related to
the govt. expenditure are studied in this branch of
public finance.
3) Financial Administration – This branch of public finance studies
the income and expenditure of the financial administration of the
govt.
4) Stability and Growth - In the present times , public finance is
mainly concerned with the economic stability and other related
problems of a country.
5)Federal Finance – Distribution of the sources of income and
expenditure between the central and the state govt. in the in the
federal system of the govt. is also studied as the subject matter of
public finance
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1) Public Finance is a science – Science is the systematic study
of any subject which studies causal relationship between facts.
Public finance is a systematic study relating to revenue and
expenditure of the govt. It also studies the causal relationship
between facts relating to revenue expenditure of the
government.
2) Public Finance is an art – Art is the application knowledge for
achieving definite objective. Fiscal Policy which is an
important instrument of public finance makes use of the
knowledge of govt.’revenue and expenditure.
Public finance is an art. It is concerned with real problems.
In short, Public finance is both science and art. It positive
1) Increase in the Activities of government - Govt. responsibility
today is not merely to maintain Peace and order rather the
modern welfare govt also work for the economic devlopment,
full employment , price stability ,eradication of poverty, etc. So
owing to an increase in economic devlopment and social welfare
activities , there has also been an increase in the importance of
public finance.
2) Effect on Economic life – The activities of public finance like
public expenditure , taxation system , etc have a great effect
on economic life . As a result of the govt. policy regarding
taxation or expenditure , production can be increase, saving can
be increased.
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1)To Achieve Adjustment in allocation of resource – study
of public finance tells how coordination among the
allocation of resources should be effected. Income and
expenditure process of the govt. serves to allocate the
resources of the country between private goods and social
goods . It also determine the quantum of production of
different social goods.
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2)To Achieve Adjustment in the Distribution of Income and
Wealth – Study of Public finance give us knowledge of
those methods which help us to inequalities of wealth and
income
3) To Achieve Economic Stability –1) In order to remove
involuntary unemployment, effective demand be stimulated by
reducing the taxes. 2)To check inflation, public expenditure be
curtailed and the 3)If there is full employment and price stability
in the economy , then existing level of taxes be maintained.
4)To Achieve Economic Development – T o increase the rate
economic growth , it is essential to accelerate the rate of capital
formation. Hence, fiscal policy should be so framed as to
increase the rate of saving and investment and reduce
consumption.
It is clear from the above account that study of public finance is of
utmost importance in the modern times.
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