Public finance is the finance sector that deals with the allocation of resources to meet the set budgets for government entities. It therefore, affects the overall economic and social system of the country. (3) Regulating Consumption Habits. The term “public finance“ may be defined as the identification of specific financial relationships and functions running between public administration bodies and institutions (i.e. It imposes taxes on items of consumption, the use of which is to be discouraged such as wine, cigarettes, tobacco and bidi, and allows concessions and rebates in taxes if it likes to encourage the consumption of any commodity. During inflation, it reduces the indirect taxes and genera expenditures but increases direct taxes and capital expenditure. Public finance as a concept may be understood on two levels – 1) as a practical activity of all components of public administration and 2) as a theoretical area. Public finance helps industrial development of the country as follows-           . The major function is to ensure that proper accounting can be given to Parliament. If there is high disparity it imposes more taxes on income, profit and properties of rich people and on the goods they consume. Public Sector Finance. Thus. On the other hand, the Government encourages the exports of its surplus production. on the one hand it reduces the purchasing power of the richer sections and on the other hand, increases the purchasing power of the poor sections of the society. 3. The government uses the revenues and expenditures in order to erase the gap between urban and rural and agricultural and industrial sectors. 3―Object of this Act. PART I—PRELIMINARY 1―Short title and commencement. They are expected to pull together and work as a team for the common good of the organization in question. (6) Industrial Development. During prosperity, the government imposes more tax and raises the internal public debt. As the objective of the government is not profit maximization but welfare so, it is usually noticed that government expenditure exceeds the revenue. The government uses the revenues and expenditures of itself in order to reduce inequality. In case of deflation, the policy is just reversed. envisions the education system of the country to be redefined through active engagement, discussions, required assistance and by bringing the right information to your fingertips. Get Tyrocity mobile app for your Android device, Address: ChadaniChowk, Tyanglaphat, Kritipur, Nepal, © 2012-2020 All rights reserved. Public finance regulates the consumption habits of the people. (adsbygoogle = window.adsbygoogle || []).push({}); Government finance is important to achieve sustainable high economic growth rate. (iii) The role of public finance in under-developed countries is to bring economic stability to keep the level of consumption and investment quite up to the level of production. The planning authorities fix the priorities of expenditure for the plan period. (i) Governments grant Subsidies and grants to various industries these days to enable them to increase the production of different essential items. 7. Public finance renders valuable help in the planned economic development of the country. Abstract This paper focuses on the role of government finance in economic development. (2) Planned Economic Development. These operations restricting imports and encouraging exports of the Government maintain the balance of trade. Economic stability: The government uses the fiscal tools to stabilize the economy. Prof. Dalton in his book Principles of Public Finance states that “Public Finance is concerned with income and expenditure of public authorities and with the adjustment of one to the other”.