The role that government plays in the maintenance of the economy of a particular nation is technically known as public finance. It is used in the assessment of the government revenue along with the various
expenditures, so that the desired effects can be achieved and the undesirable ones can be avoided. It has long lasting effects on:
• Resources’ Efficient Allocation
• Income Distribution
• Macroeconomic Stabilization
It is the basic role of any government to analyze the public finance. It has been observed that when public finances are not monitored effectively, there is always a risk of market failure leading to a subsequent government failure. The public finances form the corner stone of the tax policy of any nation. These finances also ensure that social benefits are maximized to the best, yet not compromising on the revenues. The public finances are responsible for the minimum number of efficiency loss, which is a consequence for distortion cause by various economic activities.
Deficit Finance also comes in the broader scope of public finance. It essentially, helps the government to ease out the tax burdens thus forming the basis of fiscal policy for a nation. The various concerns like social equity and issues related to income distribution are linked to public finance very closely. Managing the public finance actually deals with almost all the aspects of expenditure management, resource mobilization, program prioritization, budgetary process along with exercising controls. Public finance is extremely vital because the main emphasis of the citizen is for the value of money.