By Crystal Cristin

"Unlocking Prosperity: The Role and Importance of Government Finance and Expenditure"

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Government/ Public Finance: It is a science which studies the income and the expenditure of the government.

ITS IMPORTANCE:

  1. Efficient allocation of resources: Government finance can play an important role for efficient allocation of resources in the productive sector.
  2. To maintain economic stability: Financial policy of the government determines the rate of inflation, balance of payment and economic growth of the country.
  3. Capital formation: The government can increase the public saving by means of tax.
  4. Social goods and infrastructure: Government enterprises can produce and supply social goods and develop infrastructure.
  5. Economic development: Government finance can play an effective role to change the economic and social structure of a country.

Government/ Public Expenditure: It is the expenses incurred by the government for developing or other purposes.

ITS IMPORTANCE:

  1. Maintain law and order: The primary function of government is to maintain law and order in the country.
  2. Utilization of natural resources: A lot of capital should be invested for the exploration and utilization of such natural resources. It can be fulfilled only by government expenditure.
  3. Development of agriculture and industry: Government should invest a large amount of capital for the arrangement of irrigation facilities, power supply, and fertilizers which are necessary for development of agriculture.
  4. Subsidies and grants: Government should provide subsidies or facilities to the private sector. Similarly, local bodies require funds for their development work and these expenses are very important for the country.
  5. Balanced growth: For special attention to backward areas it requires a lot of capital. These requirements can be fulfilled by government expenditure.