The importance of public finance in present days can be put as under :
- Maximum Social Advantage: The prime duty of the government is to attempt for maximum social welfare. For ensuring this objective, the government performs a number of activities and needs a huge amount of expenditure. Public finance provides various productive and justified sources for resources and divert these to various social development activities. In other words, public finance plays a dominant role in social
welfare of a nation.
- Reduction in Economic Disparities: For ensuring social welfare with justice it is necessary to reduce the economic disparities in the country. public finance provides a strong base for reduction in economic disparities. Heavy taxes on rich and low taxes (or exemption) on the poor helps in reducing income disparities. In present days public finance plays an
instrumental role to fulfil this objective.
- Economic Development of the Country: Public finance helps in promoting economic development in the country. The complete planning process depends upon public finance. Various policies related to public expenditure, taxation, debt deficit financing do help in accelerated economic development in the country. public finance also helps in promoting
investment, saving and capital formation in the country.
- Economic Stability: For successful implementation Of planning,
the country needs economic stability. Fiscal policy helps in checking economic fluctuations i.e., trade cycles in the economy. Gov.lent imposes heavy taxes to check inflation in the country and spends more to check deflation in the country. In other words, public finance plays a vital role in establishing economic stability in the country.
- Increase in Production and Employment: Various policies like taxation, debt. deficit financing etc. play an instrumental role in promoting production and employment in the country. Sometimes the government provides tax rebate, subsidy, tax holiday, etc. for promoting a particular sector or industry in the economy. Granting of loans etc. to various industries do help in promoting production and employment in the economy.
- Protection of Industries: Industries are the foundation for the country’s development. Developing countries do face hard competition from foreign countries. For protecting domestic infant industries, the government unposed high tariffs and import duty to safeguard the interests of domestic infant industries. In this way, public finance and its related policies help in protecting infant industries.
- Importance in Social Life: Public finance helps in obtaining the objectives of Social justice, social equality, better living standard, etc. in the economy. The government imposes high taxes on Socially harmful goods like intoxicants and provides subsidies or necessary items which assist in achieving social benefit.
- Importance to Finance Minister: The knowledge of public finance is very essential for a successful finance minister. For mobilizing adequate funds for economic planning and spending them for maximizing social welfare, a successful and able Finance Minister takes the help of public finance.
- Social Justice: Social justice in the economy can be established with the principles of public finance. The imposition of high taxes on rich people and less taxes on the poor ultimately helps in ensuring social justice in the country. Above mentioned points clearly indicate that public finance hay; been accepted as a prime instrument for establishing the economic and social development of a nation.