Public Finance
1. Public Finance Definition
Public finance is the approach of managing the public funds in the country’s economy that
plays the most important role in the development and growth of the nation, both domestically
and internationally. It also affects every stakeholder of the country, whether a citizen or not.
Introduction
Every country needs money to run. The country’s revenue is the collection of various taxes,
returns on the investment, and the government expended from the collection of the revenue.
Some expenditures are healthcare, medical facilities, salaries to the staff, members, etc. All
the revenue and expenditure are collected by or for the public. Hence, finance is called public
finance, where the role of the people is large in terms of contribution. It deals with the
revenue and expenditure at every stage the public is involved in, whether at the state or
central levels. Public finance management plays an important role in developing the economy
as its growth largely depends on its proper utilization.
2. Objectives of Public Finance
Managing Public Needs
The main objective is managing the basic needs of the public like food, shelter, health,
infrastructure, and education. All these are the government’s responsibilities so that the
fundamental public needs are fulfilled and contribute to the development of the economy.
Economic Development
Proper management leads to economic development that leads to the nation’s growth.
Removes Inequality
It also aims at removing the inequality by proper allocation of resources, i.e., providing relief
to the poor by collecting taxes from the rich class people.
Maintaining Price Stability
It helps control inflation by various packages and means for its development.
Other objectives
1. Fulfilling the basic needs of the nation.
2. Generating employment.
3. Maintaining the currency value in the international market.
Types of Public Finance
The following are the different types: –
Public Revenue
Public revenue collects money from the public through direct and indirect taxes, penalties,
fines, fees, maintenance, etc.
Public Expenditure
Public expenditure is the expenditure for the public like infrastructural facilities, basic health
facilities, medical and educational facilities, etc.
Public Debt
When the expenditure exceeds the revenue, the government can take the help of debt to fulfill
the country’s needs and run the economy.
Financial Administration
Financial administration is managing the public finance and addressing the needs of the
government like salaries to the general electives, expenditure on maintenance of communal
heritage, etc.
Components
The following are the different components of public finance: –
Collection of Revenue
The primary and utmost important component is the collection of the revenue by taxes, fines,
charges, import duty, fees, etc., to run the economy.
Public Expenditure
Expenditure involves public expenditure and government expenditure. Public expenditure
includes the infrastructure and other expenses necessary to run the government, like salaries.
Functions of Public Finance
The following are the functions –
Management of income and expenditure by optimum utilization of the resources.
Managing the growth and price stability in the economy.
Providing the necessary needs and infrastructure to the public.
Take initiatives for the development of the people, which can contribute to the
nation’s development.
Maintaining the transparency of the policies and the records of income and
expenditures.
Compare the actual position with the budgets and accordingly alter the policies and
manage the economy.
Monitor the functioning and effectiveness of the financial policy.
Preparing the economic policies for the nation’s development and the economy at
large.
Scope
The scope of public finance is not limited to managing the finance. It also focuses on
maintaining the proper infrastructure, contributing towards the national economy, reducing
unemployment, managing the financial pillars of the economy, operating the hygiene and
cleanness in the nation, analyses of tax collection, ensuring the burden of tax is not very high,
monitoring and enforcing the implementation of the financial and fiscal policy, maintaining
the confidence of the public at large, etc.
Managing Public Finance
Management of Income and Expenditure: Public finance largely involves public money;
hence management and transparency in the records play the most important role.
Managing Debt and Investments
The role of government is wide as it manages various aspects like managing and repayment
of the timely debt, managing the assets, and the investment by the government to decide the
value of holding and benefit from it.
Public Finance carries the utmost importance in the following ways: –
The proper management of public finance ensures the growth of the nation.
It encourages investment through various policies and packages.
Preparation, implementation, evolving with change in technology and the policies
framed by the government for the development of the economy at large.
It helps to maintain price stability, reduce inflation and unemployment.
It is also important in terms of allocating natural and human resources.
Thus: Public finance is the way of managing public funds. Still, it is limited to administering
public funds and other things like price stability, economic growth, inequality of income,
unemployment, human rights, etc. Management of public finance is the wider term. It
requires proper planning, allocation of resources, and controlling the unfavorable situations,
etc., by making the financial and fiscal policies to ensure the nation’s growth at large.
