S R Dalvi (I) Foundation

What is a subsidy, and how many types are there?

You must have heard someone uttering the word subsidy at some time or another. After listening to the word, this thought comes to mind: What is this subsidy word? Along with this, these questions also arise in our mind, who gives this subsidy, why does it give, and for what reason?

Subsidy means financial help from the government. Along with this, would like to tell other words that the benefit received by the government to any institution, business or person is also called a subsidy, this subsidy is usually given to a person in the form of tax or tax deduction.

For what reasons the subsidy is given?
The main objective of this subsidy given by the government is to reduce the economic burden on the common people. Most government subsidies are used to help small-scale industry sectors, and often this subsidy is used to promote social and economic policies. If there is a loss in any business sector then the government provides them assistance through subsidy. Sometimes there is an increase in the prices of things like our LPG gas, etc., then the government provides assistance to the people through subsidies, by doing this the government tries to reduce the increased price of these things.

How is the subsidy distributed and what is the process?
The Government of India distributes the subsidy to us in two different forms, namely:- Direct and Indirect. Financial assistance in the form of cash given by the government is called a direct subsidy, on the contrary, financial assistance given by the government through tax exemption, low interest in loans taken for itself, etc. is called an indirect subsidy.

How is the subsidy calculated?
To decide on the subsidy, the government has to take into account many facts, then it has to be calculated accordingly, as in the loan amount, interest rate, the total cost incurred, production, and government-related works. By adding all the expenditures incurred, the government decides the amount of subsidy to be given through a certain formula.

What are the types of subsidy?
There are many types of subsidies, out of which we have described some important subsidies in the following way: –

Production subsidy: – Production subsidy means the economic benefit given on the production of a product. Production subsidy is called that, which is given on the specific production of a product. Sometimes the government provides necessary subsidy in the production of a particular product, they do this so that the production of that product is more and more and more people can be benefited in the production of that product. So that more and more people can be encouraged to come forward in that production area
Employment Subsidy: – Sometimes the government also provides subsidy in the field of employment, the main objective of this subsidy is to free the country from unemployment. This employment subsidy given by the government is to encourage industrialists and try to provide new employment opportunities.

Transport Subsidy: – The government provides subsidy to the government so that the government transport sector can be promoted. The main purpose of providing this subsidy is to reduce pollution, so that people who use their private vehicles can use government transport instead of their private vehicles.

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

Religious Subsidy: – Not only this, apart from this, our government also gives subsidy for religious areas, this subsidy is provided by the government to the travelers traveling on the pilgrimage sites of their country, the main purpose of doing this is that any travelers But the burden of their expenses could not remain excessive.

Benefits of subsidy ?
It was told above that subsidy has some disadvantages and advantages, some of those advantages are as follows. Through subsidy, the benefit also reaches the people of weaker sections: –

Farmers get benefit :- Most of India’s population does agriculture, in this they suffer loss like :- Fertilizer cost, seed cost 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 farmers a lot by using subsidies to buy seeds, fertilizers, etc.

Efforts to reduce unemployment: – As you read 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 mostly successful in reducing the rising unemployment in the country. The government of our country also gives an opportunity to promote employment in the field of small scale industry by providing necessary subsidy to all the young entrepreneurs.

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