In India there is large inequality in terms of wealth. To set off this bridge Govt resorts to subsidies for resource redistribution and to achieve social welfare of the masses. Over the periods of time different political class have used subsidies to garner votes. There are various advantages of subsidies:
- Empowerment and security to the weak
- It help to reduce socio-economic inequalities
- Cascading impact on development indicators- it hasten the development in term of human development
- It will help to achieve food and nutritional security.
- Will help to boost economic activity.
- Capital asset creation will take place.
But there are negative sides too:
- Impact on FD
- Politicisation lead to irrationality and un necessary perpetuation of subsidies.
- Mis directed subsidies, not reaching to the masses
- Imbalanced budget
- Fail to create an envt. Of innovation and efficiency
- The fund can be utilised for investment creation
Hence, rationalisation of subsidies is a must. Govt need to find out the loopholes in the system and try to fix it with innovative solution like DBT. Capping of subsidies is also must. In agriculture subsidies in electricity need to be look into as major benefits is cornered by the big farmers only.