Types Of Subsidy We Need To Know
Economy

12-Aug-2020

Types Of Subsidy We Need To Know

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You must have heard someone spelling the word subsidy at some time or the other. After listening to the word, it comes to our mind that what is this subsidy word? Along with this, questions also arise in our minds who gives this subsidy, why, and why it gives it?

Subsidy means financial support from the government. Simultaneously, one would like to say in other words that the benefit provided by the government to an organization, business or individual is also called subsidy, this subsidy is usually given to a person in the form of tax or tax deduction. 

The main objective of this government subsidy is to reduce the economic burden on the common people. Most government subsidies are used to help small scale industries, and often this subsidy is used to promote social and economic policies.

If there is a loss in any of the merchant sectors, the government provides them assistance through subsidy. Sometimes the prices of things like our LPG gas, etc. increase, then the government provides subsidies to the people, by doing so the government tries to reduce the increased value of these things. 

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The Government of India distributes subsidies to us in two different forms, namely: direct and indirect. The subsidy in the form of cash in the form of government subsidies is called direct subsidy, in contrast to this, the government is giving indirect subsidy through tax exemption, less interest in loan taken, etc. 

To fix the subsidy, the government has to take many facts into consideration, then it has to be calculated accordingly as the amount of loan taken for it, interest rate, the total cost incurred, production, and government-related works. The government decides the amount of subsidy to be given through a fixed formula by adding all the expenditures to be incurred. 

There are many types of subsidy, out of which some of the important subsidies we have described in this way are given below: - 

Production subsidy: - Production subsidy means the economic benefit given on the production of a product. Production subsidy is that which is given on a particular production of a product. 

Sometimes the government provides necessary subsidies in the production of a particular product, they do this so that the production of that product is more and more and more people are benefited in the production of that product. So that more and more people can come forward and encourage in that production area. 

Employment subsidy: - Sometimes the government provides subsidy even in the field of employment, the main purpose of this subsidy is to make the country free from unemployment. This employment subsidy given by the government is to try to provide new employment opportunities by encouraging industrialists.

Transport subsidy: - The government provides government subsidy so that government transport can get a boost. The main objective of providing this subsidy is to reduce pollution, so that those people who use their personal vehicles can use government transport more and more in place of their personal vehicles.

Tax subsidy: - The main purpose of tax subsidy given by the government is to give tax exemption. There are many main objectives of doing this, such as creating more job opportunities to promote any type of industries or through any type of industry.

Religious subsidy: Not only this, in addition to this, our government also provides subsidy for religious areas, this subsidy is provided by the government to the travelers traveling to the pilgrimage sites of their country, the main purpose of doing this is that any travelers But they could not bear the burden of their expenses.

Every country in the world provides subsidy keeping in view its economic condition, on the basis of this, the Government of India also provides subsidy on many things of the country, which is as follows: - 

Subsidy for the food industry: - The government also provides subsidy for food industries, so that they can trade food industries in a better and better way. This subsidy is given for some trades such as milk, fisheries, poultry and fruits for many such small industries.

Fertilizer subsidy: - We have the highest number of farmers in our country, that is why our country is called agricultural country, but it costs a lot for small farmers to cultivate, farmers have to use fertilizer for a good crop, and The price of fertilizers has become very high in this era of inflation.

Keeping these expenses of the farmers in mind, the Government of India provides some help to purchase fertilizers, this assistance is provided through the Government of India subsidy so that the farmers are able to cultivate fertilizers at low prices such as: - Urea and others. 


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Cons of Subsidy

The main purpose of the subsidy given by the government is to provide assistance to the poor people, the entire cost of the subsidy given in our country is provided by the tax paid to many people of the country. 

Playing for the needy can reach someone else.  The government provides many types of subsidies. Sometimes it happens that the needy do not get his subsidy and gets a subsidy to someone else and that person benefits instead of the needy. it happens. 

The rich also get subsidy: - In any country, both rich and poor people live, and sometimes the subsidy given by the government benefits both the poor and the rich. If we talk about, the benefit of subsidy to the poor people is right, but on the contrary, the benefit of subsidy to rich people is unwarranted.

Such as: - In our country, the LPG gas subsidy distributed by the Government of India is available to all individuals, some of whom are strong with the economic conditions, they also get the benefit.

Non-utilization of subsidy:  The government of our country also provides necessary subsidy in the areas of small scale industries. So that even in such areas people start their own industry and become successful and unemployment can be eliminated. While there are advantages, it is not necessary that the subsidy is being used properly in the sectors of small scale industries provided by the government.

If we understand as an example, if the government is providing subsidy to 100 people in the field of small scale industry, then it is not necessary that all of them can succeed, only 80 to 85% of these people are successful in such industries. This approach also leads to the loss of such a subsidy.

Excess load: - The subsidy in India is met by the tax collected by the residents of the country. In such a situation, the tax burden is increased on the people who do.

Reduction in the product: - Due to the subsidy given in the product of the country, the price of the product is reduced considerably, as the price of the product decreases, the demand for it increases more, by doing so, that product in our country A situation of deficiency arises. In this way also there is some loss in the product through subsidy.

Subsidy Pros

Subsidies have some disadvantages and advantages, some of the advantages are mentioned below : 

Farmers get the benefit: - Most of the population of India cultivates, in this, they suffer losses such as - Fertilizer expenses, seed expenses, etc. In such a situation, to help the farmers, the Government of India provides food subsidy, which reduces the burden of their expenditure. The government helps the farmers to buy seeds, fertilizers, etc. using subsidies. 

Trying to reduce unemployment: - As you mentioned above, the Government of India helps a lot in reducing unemployment in our country through employment subsidies and tax subsidies.

The Government of India creates new employment opportunities by providing subsidies to big industries, through all these subsidies, the Government of India is achieving success in reducing the rising unemployment mostly in the country. The government of our country also provides an opportunity to promote employment by providing necessary subsidies to all young entrepreneurs in the field of small scale industries. 

As we know, subsidies are available in many areas and there are other benefits of getting it, but it may have some disadvantages as well. Due to the subsidy, people get the necessary support in many work areas and with the help of financial assistance, they also get an opportunity to promote employment.

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