Introduction to Public Finance, Expenditure, Revenue, and Debt

What does Public Finance Management mean? Introduction to Public Finance, Expenditure, Revenue, and Debt (In Hindi); Collection of sufficient resources from the economy in an appropriate manner along with allocating and use of these resources efficiently and effectively constitute good financial management. Resource generation, resource allocation, and expenditure management (resource utilization) are the essential components of a public financial management system – By Wikipedia.

The Concept of Public Finance Management explains with its Expenditure, Revenue, and Debt.

The following subdivisions form the subject matter of public finance.

Step by step explains each one; Public expenditure, Public revenue, Public debt, Financial administration, and Federal finance.

Public finance is the management of a country’s revenue, expenditures, and debt load through various government and quasi-government institutions. This guide provides an overview of how public finances manage; what the various components of it are, and how to easily understand what all the numbers mean. A country’s financial position can evaluate in much the same way as a business’ financial statements.

Public Finance:

The study of government’s role in the public finance economy is, it is the branch of economics; which evaluates the government expenditure of government revenue and government authorities, and one or the other adjustment to achieve desirable effects and avoid undesirable people.

The federal government helps prevent market failure by supervising the allocation of resources, distribution of income, and stabilization of the economy. Regular funding for these programs mostly secures through taxation.

Borrowing from banks, insurance companies, and other governments and earning dividends from their companies helps fund federal government, state and local governments also receive grants and assistance from the federal government, in addition to ports, airport services And user fees with other features; Penalty derived from breaking the law; Revenue from licenses and fees, such as for driving; And the sale of government securities and bond issues is also the source of public finance.

Public Expenditure:

Public expenditure refers to government expenditure ie government expenditure. This is done by the central, state, and local governments of any country. Of the two main branches of public finance, i.e. public revenue and public expenditure, we will first study public expenditure.

Public expenditure can define in this way,

“The expenditure incurred by public authorities like central, state and local governments to satisfy the collective social wants of the people is known as public expenditure.”

But now, the cost of the government across the world has increased a lot. Therefore, modern economists have started analyzing the effects of public expenditure on production, distribution, and income levels, and employment in the economy.

Classical economists did not analyze the effects of public expenditure in the nineteenth century, due to very limited governmental activities for public expenditure.

During the 19th century, most governments followed laissez-faire economic policies, and their work was limited to protecting aggression and to maintain law and order. The size of the public expenditure was very small.

Public Revenue:

To maximize the social and economic welfare of the governments, there is a need to do various tasks in the field of political, social, and economic activities. To do these duties and tasks, the government needs a large number of resources. These resources call public revenues. Public revenue includes revenue from administrative activities such as taxes, fines, fees, gifts, and grants.

According to Dalton, however, the word “Public Revenue / Income” has two senses – broad and narrow. In its broadest sense, it contains all the income or receipts that can secure a public authority at any time of time. In its narrow sense, however, it includes only the sources of public authority’s income, which is commonly known as “revenue resources”. To avoid ambiguity, thus, the former calls “public receipts” and later “public revenue”.

As such, receipts from public lending (or public debt) and public property sales mainly exclude from public revenue. For example, the budget of the Government of India is classified as “Revenue” and “Capital”. In the “heads of revenue”, the heads of income under the capital budget calls “receipts”, thus, the word “receipts” includes. Public income sources that exclude from “revenue”.

Revenue receipts and capital receipts are both. Revenue receipts derive from the taxes of various forms. Capital receipts include primary internal market borrowing and external debt. However, a large portion of the state’s revenue comes from internal sources. The main point of difference between the two is that where there is a gain or earning of people in the form of a source; then there is public property in the form of a source.

Don’t Confuse they are differences and similarities; Public and Private Finance: Differences, Similarities, and Dissimilarities.

Public Debt:

In simple terms, government / public debt (also known as public interest, government debt, national debt, and sovereign debt) is the outstanding debt by the government. Borrowing by public authorities is of recent origin. This practice of revenue collection was not prevalent before the eighteenth century.

“Public debt” often uses interchangeably with sovereign debt terms. Public debt usually refers only to National debt. But in some countries, loans outstanding by states, provinces, and municipalities also include.

In the Middle Ages, borrowing was a rare event. Whenever there is urgency, there is usually a war; the emperor relies on their deposits or borrows on their own debts. However, such lending was not recognized by society. It was considered a “dead-weight” loan.

This promises to the government with them that the holders of these bonds will be paid interest at regular intervals, at the end of the term, at the lump sum rates at the regular intervals.

Prof. According to Taylor,

 “Government debt arises out of borrowing by the Treasury, from banks, business organizations, and individuals. The debt is in the form of promises by the treasury to pay to the holders of these promises a principal sum and in most instances interest on that principle.”

Prof. Adams points out that public debt is the source of advance revenue which is opposite with direct/derived revenue; and, therefore every question of public debt should be judged in the light of this fact.