When the responsibilities of the state increase, it supplements traditional revenue sources by borrowing from individuals and institutions within and outside the country. This is public debt.

(i) CGST - Central Goods and Services Tax
(ii) SGST - State Goods and Services Tax
(iii) IGST - Integrated Goods and Services Tax

Income tax, wealth tax, corporate tax, capital gains tax.

Introduction:
(i) The process of repaying a public debt is called redemption.
(a) Sinking Fund
(i) The Government establishes a separate fund into which every year a fixed amount of money is credited.
(ii) By the time the debt matures, the fund accumulates enough amount to pay off the principal along with interest.
(a) Conversion
(i) An old loan is converted into a new loan.
(ii) A high interest public debt is converted into a low interest public debt.
(c) Budgetary Surplus
(i) When the Government has a surplus budget, it can be used for repaying the debt.

Defence
1. The Government protects the people from external aggression and internal disorder.
2. Through police and military forces it renders protective services.
Judiciary:
1. It provides adequate judicial structure to render justice to all citizens.
Enterprises
1. The regulation and control of private enterprise comes under the government.
Social Welfare:
1. The state provides education, social security, social insurance, health and sanitation for the people.
Infrastructure
1. Modern States build the base for the economic development of the country by creating social and economic infrastructure.
Macro-economic policy
1. The Government follows fiscal policy and monetary policy to achieve macro economic goals.
Social Justice
1. During the process of growth certain sections of the economy gain at the cost of others.
2. Government intervenes with fiscal measures to redistribute income.
Control of Monopoly
1. State intervenes through control of monopolies and restrictive trade practices to curb concentration of economic power.

Rationality
1. Both public finance and private finance are based on rationality.
2. Maximization of welfare and least cost factor combination underlie both.
Limit to borrowing
1. Both have to be restrained with borrowing.
2. Government cannot live beyond its means.
3. There is a limit to deficit financing by the state.
Resource utilisation
1. Both have to make optimum use of their limited resources.
Administration
1. If the administrative machinery is inefficient and corrupt it will result in wastages and losses.

Introduction:
(i) The modern state is a welfare state. In a welfare state government has to perform several functions i.e. social, economic and political.
(ii) These activities lead to increasing public expenditure.
Population Growth
(i) The growth in population needs huge investment in health and education, law and order. Young population need increasing expenditure on education & youch services.
(ii) Aging population needs transfer payments - old age pension, social security.
Defence Expenditure
(i) Defence expenditure increases due to modernisation of defence equipment.
Government Subsidies
(i) Government provides subsidies on food, fertilizers, interest on priority sector lending, exports, education.
(ii) Because of the huge subsidies public expenditure increased manifold.
(iii) Corporate sectors also receive subsidies.
Debt Servicing
(i) Government has borrowed heavily from internal and external sources.
(ii) So government has to make huge amounts of repayment towards debt servicing.
Development Projects
(i) Various development projects like irrigation, iron and steel, heavy machinery, power, telecommunications involve huge investment.
Urbanisation
(i) The urban population is 43 %.
(ii) There are more than 54 cities above one million population.
(iii) The increase in urbanization needs heavy expenditure on law and order, civic amenities.
Industrialisation
(i) In a planned economy, the government starts basic and heavy industries which need huge capital and have long gestation period.
(ii) UDCs also need strong infrastructures like transport, communication, power, fuel.
Increase in grants in aid to state and union territories
(i) There is increase in grants-in-aid to state and union territories to meet natural disasters.

Principle of Independence
(i) A Government should be autonomous and free about the internal financial matters concerned.
(ii) Each Government should have separate sources of revenue, authority to levy taxes, to borrow money and to meet the expenditure.
Principle of Equity
(i) The resources should be distributed among the different states so that each state receives a fair share of revenue.
Principle of Uniformity
(i) Each state should contribute equal tax payments for federal finance.
Principle of Adequacy of Resources
(i) The resources of each Government should be adequate to carry out its functions effectively to meet current and future needs.
(ii) Resources should be elastic to meet the growing needs and unforeseen expenditure.
Principle of Fiscal Access
(i) The Central and State Governments must be able to develop new source of revenue.
Principle of Integration and coordination
(i) There should be perfect coordination among different layers of the financial system.
Principle of Efficiency
(i) The financial system should be well organized and efficiently administered.
(ii) There should be no scope for evasion and fraud.
(iii) Double taxation should be avoided.
Principle of Administrative
Economy
(i) The cost of collection should be at the minimum level and the major portion of revenue should be made available for the other expenditure outlays of the Governments.
Principle of Accountability
(i) Each Government should be accountable to its own legislature for its financial decisions.