Get access to thousands of high quality educational resources

Discuss the roles of public finance to the developing countries.

      

Discuss the roles of public finance to the developing countries.

  

Answers

Judy
Public finance plays a dynamic role in a developing country.
• It is indispensable for its economic development. According to Prof. Nurkse, “Public finance assumes a new significance in the face of the problem of capital formation in underdeveloped countries. The per capita incomes and savings are extremely low in such countries. The few rich waste large portions of their savings in property, jewellery, gold, speculation, etc. and in conspicuous consumption.
• Fiscal policy diverts them into productive channels through taxation, borrowing and expendi-ture. Fiscal policy promotes economic development by increasing the rate of investment, encouraging investment in social and economic infrastructure, increasing employment opportunities, reducing balance of payments disequilibrium, counteracting inflation, reducing inequalities of income and wealth, and increasing national income.
• By a judicious policy of taxation, the government reduces private consumption and transfers resources to the government for investment, increases the- incentive to save and invest, reduces economic inequalities and mobilizes economic surplus.
• Public borrowing is an anti-inflationary measure by mobilizing surplus money in the hands of the people in a developing country. It is a useful tool of economic development by diverting resources from such unproductive uses as property, jewellery, gold, etc. to productive uses. Public borrowing is resorted to for specific development projects like power generation, irrigation works, roads, etc.
• The role of public expenditure in economic development lies in increasing the growth rate of the economy, providing more employment opportunities, raising incomes and standard of living, reducing inequalities of income and wealth, encouraging private initiative and enterprise and bringing about regional balance in the economy. All these are achieved by spending on public works, agriculture, industry, transport and communica¬tions, power, financial and-banking institutions, social services, etc. The government is able to increase public expenditure through a budget deficit.
Judiesiz answered the question on July 6, 2018 at 23:59

Next: Show the similarities and differences between public and private finance.
Previous: Discuss in details the types of taxes

View More Finance Questions and Answers | Return to Questions Index


Exams With Marking Schemes

Related Questions

© 2008-2024 by KenyaPlex.com. All Rights Reserved | Home | About Us | Contact Us | Copyright | Terms Of Use | Privacy Policy | Advertise