Meaning, Nature and Scope of Public Finance

Scope of Public Finance

Public finance not only includes the income and expenditure of the government but also the sources of income and the way of expenditure of various government corporations, public companies and quasi government ventures. Thus the scope of public finance extends to the study of independent bodies acting under the government’s direct and indirect control. The Scope of public finance includes:

  1. Public Revenue

Public finance deals with all those sources or methods through which a government earns revenue. It studies the principles of taxation, methods of raising revenue, classification of revenue, deficit financing etc.

  1. Public Expenditure

Public expenditure studies how the government distributes the resources for the fulfillment of various expenses. It also studies principles that the government should keep in view while allocating resources to various sectors and effects of such expenditure.

  1. Public debt

It deals with borrowing by the government from internal and external sources. AT any time government may exceed its revenue. To meet the deficit, government raises loans. The study of public fiancé focuses on the problems of raising loans and the methods of repayment of loans.

  1. Financial/Fiscal administration

The scope of financial administration is wider. It covers all the financial functions of the government. It includes drafting and sanctioning of the budget, auditing of the budget, etc. Financial administration is concerned with the organization and functioning of the government machinery responsible for performing the various financial functions of the state. The budget is the master financial plan of the government.

  1. Economic Stabilization and Growth

In the present times, public finance is mainly concerned with the economic stability and other related problems of a country. For the attainment of these objectives, the government formulates its fiscal policy comprising of various fiscal instruments directed towards the economic stability of the nation.

  1. Federal Finance

Distribution of the sources of income and expenditure between the central and the state governments in the federal system of government is also studied as the subject matter of the public finance. This branch of public finance is popularly known as Federal Finance.

It is  a positive  science as by the study of public finance factual information about the problems of government’s revenue and expenditure can be known. It also offers suggestions in this respect.

It is also normative science as study of public finance presents norms or standards of the government’s financial operations . It reveals what should be the quantum of taxes, kind of taxes and on what items less of public expenditure can be incurred.

For more notes on Public Finance click on the link below:

Public Finance


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Meaning, Nature and Scope of Public Finance

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