Role/ Importance of public finance in developing country

Public finance is very important for the developing country. Some of them are as below,

a).Reduces the consumption of harmful goods
: The consumption of cigarette, alcohal,opium and other harmful commodities need to be discouraged. The government of a levy heavy taxes to discourage the consumption of these harmful commodities.

b) Protection of infant industries: 
If the infant and newly started firms or industry in developing nations are allowed to struggle with foreign firms specially from those which are technologically advanced country, they may not survive due to many reason and factors. These industries need protection and government often levies duties in order to protect them.

c) Provision of public goods: 
Government provides public goods that is the government finance and services such as road, military forces, street lights etc. The private citizens even the wealthy once, would not voluntarily pay for this services and therefore business have no incentive to produce them.

d) Side effects of a market economy: 
The public finance also enables government to correct or offset the undesirable side effects of a market economy. These side effects are called spillover or externalities. For example, industries may generate population and release it into the environment without considering the adverse effect on others people pollution is a spillover because it affects people who are not responsible for it. To correct spillover government can encourage or restrict certain activities. For example, government can sponsor recycling programs to encourage less pollution pass the laws that restrict the population or imposed charges or taxes on the activities that cause pollution.

e) Re-distribution of Income:
 Government redistribute income by collecting taxes from their wealthier citizens to provide resources for their needy once. The government levies higher taxes on the richer sections and spend the income on providing cheap food, cheap housing, free medical aid etc. for the poorer sections of the community. Hence, public finance plays a vital role in reducing the inequalities in the capitalist economy.

f) Subsidies and Grants:
 In modern times, subsidies and grants are inevitable for producing essential goods and services for the masses. The government provides subsidies and grants to different industries to increase the production of essential goods in the country. These subsidies and grants have special place in the government expenditure of underdeveloped and backward country.

g) Optimum utilization of resources:
The natural resources of developing country are underutilized. The poorer utilization of natural recourses is imperative, not only for present generation but also for the unborn generations. The state can direct the flow of production, consumption and distribution in the economy by framing suitable budgeting policies.

h) Steady Economic Growth: 
 The public finance is important to achieve sustainable high economic growth rate. The government uses the fiscal tools in order to bring increase in both aggregate demand and supply. The fiscal tools are taxes, public debt, and public expenditure. The principles of public finance help government to achieve balance development in the economy.