ROLE OF PUBLIC FINANCE

◦     ROLE OF PUBLIC FINANCE
ENGLISH
SHASHI AGGARWAL ECONOMICS AND LAW CLASSES

◦     ROLE OF PUBLIC FINANCE IN DEVELOPING AN ECONOMY

1.     EARLIER THE ROLE OF THE GOVERNMENT WAS NOT TO INTERFERE WITH THE WORKING OF THE  MARKET FORCES BUT ONLY TO MAINTAIN ITSELF AND TO CREATE NECESSARY ADMINISTRATIVE,JUDICIAL AND POLICE SET UP.

2.     BUT THE STUDY OF PUBLIC FINANCE IS ACQUIRING AN IMPORTANT PLACE IN THE MODERN

ECONOMIC ANALYSIS

3.     ACCORDING TO DALTON : THE BASIC PRINCIPLE OF PUBLIC FINANCE IS THAT OF MAXIMUM SOCIAL ADVANTAGE

4.     BUT NOW A DAYS EVERY GOVERNMENT WANTS TO SECURE SOCIAL WELFARE FOR THE COUNTRY

5.     THE ECONOMIC RESPONSIBILITY OF THE GOVERNMENT IS INCREASING DAY BY DAY

6.     ACTIVITIES OF PUBLIC FINANCE CAN BE EXTENDED TO ALL ASPECTS OF LIFE OF AN INDIVIDUAL AS WELL SOCIETY AS A WHOLE

7.     PUBLIC FINANCE OPERATIONS SHOULD CONTRIBUTE TO THE MAXIMIZATION OF SOCIAL AND ECONOMIC WELL BEING OF THE PEOPLE

8.     MAXIMIZATION OF PRODUCTION AND EQUAL DISTRIBUTION TO PROVIDE EQUAL OPPORTUNITIES FOR ALL TO MAKE DEVELOPMENT

·         ROLE OF PUBLIC FINANCE IN DEVELOPING AN ECONOMY

1.     TO INCREASE THE RATE OF SAVING AND INVESTMENT

2.     TO SECURE EQUAL DISTRIBUTION OF WEALTH AND INCOME

3.     TO COUNTERACT INFLATION

4.     FULL EMPLOYMENT AND ECONOMIC GROWTH

5.     CAPITAL FORMATION

6.     PLANNED ECONOMIC DEVELOPMENT

7.     REDUCTION IN ECONOMIC INEQUALITIES

8.     OPTIMUM UTILIZATION OF RESOURCES

9.     PUBLIC FINANCE AND ECONOMIC LIFE OF THE PEOPLE

◦     TO INCREASE THE RATE OF SAVING AND INVESTMENT

1.     UNDER DEVELOP COUNTRIES ARE UNABLE TO MAKE ECONOMIC PROGRESS DUE TO LACK OF FINANCIAL RESOURCES

2.     DUE TO INCREASING POPULATION : RATE OF SAVING IS VERY LOW AND HIGH CONSUMPTION

3.     RICH PEOPLE SPEND ON LUXURY GOODS AND MOST OF THEIR INCOME IS UTILIZED ON UNPRODUCTIVE CONSUMPTION

4.     TO REDUCE ON SPENDING ON LUXURY GOODS HIGH TAXES ARE IMPOSED AND HIGH TAX ALSO IMPOSED ON THE HIGHER INCOME GROUP

◦     TO SECURE EQUAL DISTRIBUTION OF WEALTH AND INCOME

1.     BASIC PROBLEM OF UNDER DEV LOPED NATION IS UNEQUAL DISTRIBUTION OF INCOME AND WEALTH

2.     PROGRESSIVE TAXATION IN DIRECT TAXES AND HEAVY TAXATION ON LUXURY GOODS CAN HELP TO BRING EQUALITY IN THE DISTRIBUTION OF INCOME AND WEALTH

3.     USING THE PROCEEDS OF PROGRESSIVE TAXATION TO PROVIDE FOR SUCH PUBLIC UTILITY SERVICES WHICH WILL PROMOTE THE WELFARE OF THE PUBLIC

4.     THE GOVERNMENT CAN MAKE INVESTMENT IN VARIOUS FIELDS TO RAISE THE INCOME OF THE POOR

◦     TO COUNTERACT INFLATION

1.     THE IMBALANCE BETWEEN THE DEMAND FOR AND THE SUPPLY OF REAL RESOURCES MAY LEAD TO INFLATION

2.     IN ORDER TO CHECK INFLATION BUDGETARY POLICIES CAN BE USED BY THE GOVERNMENT

3.     PROGRESSIVE TAXATION DIRECT TAXES AND COMMODITY SHOULD BE IMPOSED ON LUXURY GOODS

4.     TO CHECK INFLATION PUBLIC EXPENDITURE SHOULD BE CURTAILED AND LEVEL OF TAXATION ENHANCED

◦     ACHIEVE ECONOMIC STABILITY

1.     HOW THE ECONOMIC FLUCTUATION CAN BE PREVENTED

2.     PRICE LEVEL AND EMPLOYMENT DEPENDS UPON THE LEVEL OF EFFECTIVE DEMAND

3.     TO REDUCE INVOLUNTARY UNEMPLOYMENT EFFECTIVE DEMAND SHOULD BE STIMULATED BY REDUCING THE TAXES

4.     TO CHECK INFLATION PUBLIC EXPENDITURE SHOULD BE CURTAILED AND LEVEL OF TAXATION ENHANCED

◦     PLANNED ECONOMIC DEVELOPMENT

1.     PRODUCTIVE RESOURCES ARE LIMITED IN QUANTITY AS WELL AS THE QUALITY

2.     PROVIDES VALUABLE HELP IN THE PLANNED ECONOMIC DEVELOPMENT OF THE COUNTRY

3.     THE ENTIRE MACHINERY OF PLANNING WORKS THROUGH THE MECHANISM OF PUBLIC FINANCE

◦     REDUCTION IN ECONOMIC INEQUALITIES :-BY IMPOSING HEAVY TAXES ON THE RICHER SECTIONS OF THE SOCIETY AND SPEND THE INCOME SO RECEIVED ON PROVIDING CHEAP FOODS,CHEAP HOUSING, EMPLOYMENT AND FREE MEDICAL RELIEF

◦     OPTIMUM UTILIZATION OF RESOURCES BY ADOPTING PROPER MONETARY AND FISCAL POLICY

◦     INCREASE IN THE ACTIVITIES OF THE GOVERNMENT :- GOVERNMENT ‘S RESPONSIBILITY TODAY IS NOT MERELY TO MAINTAIN PEACE AND ORDER RATHER THE MODERN WELFARE GOVERNMENT ALSO WORK FOR THE ECONOMIC DEVELOPMENT,FULL EMPLOYMENT,PRICE STABILITY,ERADICATION OF POVERTY AND EQUITABLE DISTRIBUTION OF INCOME AND WEALTH

◦     IMPORTANCE OF PUBLIC FINANCE

◦     EXPANSION OF STATE ACTIVITIES :

1.     THE ACTIVITIES OF THE STATE ARE NOT CONFINED TO LOOKING AFTER THE SECURITY OF LIFE AND PROPERTY AGAINST FOREIGN AGGRESSION AND AS SOCIAL LIFE BECOME MORE COMPLEX,THE STATE FOUND IT NECESSARY  AND POSSIBLE TO TAKE STEPS FOR INCREASING THE WELFARE OF THE STATE

2.     GRADUAL SHIFT FROM THE PUBLIC SENTIMENT FROM CAPITAL ECONOMY TO SOCIALIST ECONOMY

3.     WITH THE WIDENING OF STATE ACTIVITIES ,SEPARATE DEPARTMENT OF PUBLIC FINANCE CAME INTO BEING

◦     REDUCTION IN ECONOMIC INEQUALITIES : HEAVY TAXES ON RICH CLASS AND HEAVY TAX ON LUXURY GOODS

◦     EMERGENCE OF GENERALIZED SERVICES : EDUCATION,HEALTH,SOCIAL SECURITY AND PROTECTION FROM UNCERTAINTY

◦     INCREASING EMPLOYMENT : GOVERNMENT PROVIDES SUBSIDIES,GRANTS AND EXEMPTION FOR SETTING UP INDUSTRY

◦     IMPORTANCE IN UNDER DEVELOP ECONOMIES :

◦     ALSO USEFUL IN DEVELOPED COUNTRIES FOR BRINGING UP STABILITY BY PROPER FISCAL POLICY