Lets divide the concept in 2 parts

1. Public
2. Finance
Public can be generally related to government or massess or
population Whereas finance is somewhat related to expenditure
and revenue So we can say that public finance is related with
the income and expenditure of public authorites. Now lets see
the definition given by different authors
According to findlay shirras

“public finance is the study of principles underlying the

spending and raising of funds by public authorities”.
So is the concept clear to you?
Now we are going to study the nature of public finance
This is same as the nature of management
Nature of public finance implies whether it is a science or art or
both.
If we talk about public finance as science , we know that what
science is ?
Science is the systematic study of any subject which studies
relationship between facts. Public finance is considered as
science because it studies the relationship between facts relating
to revenue and expenditure of the government.
And we know the meaning of art also
Art is application of knowledge for achieving definite
objectives. Fiscal policy which is an important instrument of
public finance makes use of the knowledge of government’s
revenue and expenditure to achieve the objectives of full
employment, economic development and equality. Price stability
etc.
Next topic is scope of business finance

1. Public revenue, which deals with the method of raising funds

and the principles of taxation.
2. Public expenditure, which deals with the principles and
problems relating to the allocation of public spendings.
3. Public debt, which deals with the study of the causes and
methods of public loans as well as public debt management.
4. Financial administration, under this the problem of how the
financial machinery is organised and administered is dealt with.
This branch of public finance studies the income and
expenditure of the financial administration of the govt.

Importance of public finance

1. Steady state economic growth:

Government finance is important to achieve sustainable high

economic growth rate. The government uses the fiscal tools in
order to bring increase in both aggregate demand and aggregate
supply. The tools are taxes, public debt, and public expenditure
and so on.
2. Price stability:

The government uses the public finance in order to overcome

form inflation and deflation. During inflation it reduces the
indirect taxes and increase expenditures but increases direct
taxes and capital expenditure. It collects internal public debt and
mobilizes for investment. In case of deflation, the policy is just
reversed.

3. Economic stability:
The government uses the fiscal tools to stabilize the economy.
During prosperity, the government imposes more tax and raises
the internal public debt. The amount is used to repay foreign
debt and invention. The internal expenditures are reduced.
During recession, the case is just reversed.
4. Equitable distribution:

The government uses the revenues and expenditures of itself in

order to reduce inequality. If there is high disparity it imposes
more taxes on income, profit and properties of rich people and
on the goods they consume. The money collected is used for the
benefit of poor people through subsidies, allowance, and other
types of direct and indirect benefits to them.
5. Proper allocation of resources:

The government finance is important for proper utilization of

natural, manmade and human resources. For it, on the
production and sales of less desirable goods, the government
imposes more taxes and provides subsidies or imposes taxes
lightly on more desirable goods.
6. Balanced development:

The government uses the revenues and expenditures in order to

erase the gap between urban and rural and agricultural and
industrial sectors. For it, the government allocates the budget for
infrastructural development in rural areas and direct economic
benefits to the rural people.

7. Promotion of export:
The government promotes the export imposing less tax or
exempting form the taxes or providing subsidies to the export
oriented goods. It may supply the inputs at the subsidized prices.
It imposes more taxes on imports and so on.
8. Infrastructural development:

The government collects revenues and spends for the

construction of infrastructures. It has to keep peace, justice and
security too. It has to bring socio-economic reformation too. For
 all these things it uses the revenues and expenditures as fiscal
tools

Difference between private and public finance

So tell me what is the difference between them?

rivate finance Public finance

An individual adjusts his or her The public authority adjusts its income to
xpenditure according to his or her income its expenditure.
A private individual tries to have a surplus A public authority will spend all that it
f income over expenditure i.e. Surplus gets
udget.
inances of individuals are limited Finances of government are flexible

Not a single individual can print notes A state can print currency notes in order to
meet its expenditure in difficult times
t has a narrow scope It has a wider scope