In addition, it is difficult to control the incidence of a subsidy since their effects are transmitted through the mechanism of the market, which often has imperfections other than those addressed by the subsidy.
On 29 June 2012, C Rangarajan, Chairman of the Prime Minister's Advisory Council in view of present difficult economic position, advocated cutting down of fuel and fertiliser subsidies to keep the fiscal deficit within the budgetted level of 5.1 per cent.
under the aegis of National Institute of Public Finance and Policy, and the discussion paper brought out by Department of Economic Affairs( Ministry of Finance) in 1997, aims to provide a comprehensive estimate of budget-based subsidies in India.
In addition, recent trends have been included from the Economic Survey for the year 2004-05.
Yes it is but, Economic effects of subsidies can be broadly grouped into Subsidies may also lead to perverse or unintended economic effects.
They would result in inefficient resource allocation if imposed on a competitive market or where market imperfections do not justify a subsidy, by diverting economic resources away from areas where their marginal productivity would be higher.
However, the argument against subsidies in India does not consider that just agricultural and fisheries subsidies form over 40% of the EU budget (see Agricultural subsidy) although in Europe less than 10% of the people compared to India will be affected.
This is also true of United States and most other Western countries.
The medium to long-term risks to agriculture in such a scenario range from an eventual decline in water resources, to the intrusion of salt-water in coastal areas.
Subsidies have increased in India for several reasons.
In particular this proliferation can be traced to 1)the expanse of governmental activities 2) relatively weak determination of governments to recover costs from the respective users of the subsidies, even when this may be desirable on economic grounds, and 3) generally low efficiency levels of governmental activities.
Arising due to extensive governmental participation in a variety of economic activities, there are many subsidies that shelter inefficiencies or are of doubtful distributional credentials.
Subsidies that are ineffective or distortionary need to be weaned out, for an undiscerning, uncontrolled and opaque growth of subsidies can be deleterious for a country's public finances.