Public finance: Scope or Subject matter

Public finance deals with the problem of adjustments of income and expenditure of the government. Public finance is a field of inquiry that treat the income and outgo of government. In the modern times, public finance includes mainly five divisions- public revenue, public expenditure, public debt, financial administration and economic stabilization. The point to be noted is that the subject matter of public finance is changing day by day due to the change in the concept and functions of government. The economic role of the government is not only confined to allocation and distribution of resources besides that it also makes effort to achieve stability, full employment and higher economic growth. Broadly we categorized the scope or subject matter of public finance in following headings:

1.       Public revenue: In the study of public finance, public revenue plays an important role. It includes the study of all those methods which a government earns revenue. It studies the methods of raising public revenue; principles of taxation, deficit financing etc. all facts related to revenue are studied under public revenue. It also includes the study of-To know “what are the sources of public income?” How many taxes can be implemented? What are the principles of taxation? What are the effects of tax in production, consumption and distribution?

2.       Public expenditure: In this branch of public finance we studies about the principles and problems of government expenditure. It deals with the study of the principles and the effects of public expenditure on the production, distribution and exchange. The government must decide that whatever amount we will make expenditure. So it is a objective matter. Since this branch of public finance concerned with the allocation of resources among different branches of the economy.

3.       Public debt: When the expenditure of government exceed its revenue, then government take borrowings or loans to meet this deficit thus, this branch of public finance includes the study of how the government raises loans through various sources to meet the short fall in the government budget. It also studies the impact of the burden of public debt, debt management, methods of interest payment redemption of debt etc. In short, public debt theory mainly focuses on the sources and the problems of raising loans and methods of repayments of those loans.

4.       Financial administration: In every state, there is finance department which manages the revenue and expenditure loan and interest. So, in the subject of finance administration we studies about the methods of administration, administration control and the problems relating to the preparation of budget, execution of budget and auditing of accounts. According to Bastable, “no financial treatise can be executed unless it considers the problems of the budget and financial administration”.

5.       Economic stabilization: Economic stabilization means, the country enjoys full potential national output. But in reality, the economy stays far away from the situation of economic stabilization because of economic fluctuation, so for maintaining economic stabilization there are two important policies are formulated by government that is fiscal and monetary policy.

In short, the scope of public finance rapidly increasing day by day over the periods, due to changes in the policy and technique of raising public revenue, minimization of public expenditure, methods of collection borrowing etc. it also get affected by administration of finance.