Financial Administration: Meaning, Nature and Scope

29 Sep

Kautilya in his Arthashastra says that the entire administration of the country can be controlled through financial administration and that is why administrators in the country should give atmost importance to financial administration.

The financial sector is the centre of economic activity, its health affects the entire economy.

1.  The ratio of public expenditure to national income has been increasing over the years. This means that more money is spent on developmental activities due to factors like rise in population, increase in national income, expansion of social welfare, urbanisation, defence, administrative machinery etc.

2. Increase in total revenue: Govt revenue increasing due to more taxes.

3. Increase in plan outlays: The five year plans should weed out projects that are economically unsound and plan out expenditure by the consolidation and co-ordination of schemes.

4. Increase in public debt:  Public debt is govt. debt. Occurs when govt. expenditure is more than the revenue it collects from taxes. Govt owes usually (external when) international organisations, other governments and (internal when) citizens or groups within the country.

5. Increase in deficit financing:  Deficit financing means govt. spends more than it gets. Reflects govt. ineffeciency showing widespread tax evasion and wasteful spending.

6. Diversification of Banking system: Banks are involved in economic and social developmental activities.

7. Unsatisfactory perfomance of public enterprises: Inability to grow becomes a major constraint of economic development.

Administration means formulation of policy for calculated use of resources and making desired things happen.




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