Question

Explain the scope of public finance.

Answer 1

Scope of Public Finance:
The subject ‘Public Finance’ includes five major sub-divisions, viz., Public Revenue, Public Expenditure, Public Debt, Financial Administration, and Fiscal Policy.

(1) Public Revenue:
Public revenue deals with the methods of raising public revenue such as tax and non-tax, the principles of taxation, rates of taxation, impact, incidence, and shifting of taxes and their effects.

(2) Public Expenditure:
This part studies the fundamental principles that govern Government expenditure, effects of public expenditure, and control of public expenditure.

(3) Public Debt:

1. Public debt deals with the methods of raising loans from internal and external sources.
2. The burden, effects, and redemption of public debt fall under this head.

(4) Financial Administration:

1. This part deals with the study of the different aspects of a public budget.
2. The budget is the Annual master financial plan of the Government.
3. The various objectives and steps in preparing a public budget, passing or sanctioning, allocation evaluation, and auditing fall within financial administration.

(5) Fiscal Policy:
Taxes, subsidies, public debt, and public expenditure are the instruments of fiscal policy.