The hoisted cost prices in market are aided whilst selling them to people is called subsidy, which is loss albeit business can’t persevere with loss but Government can. Hence-fore subsidy is succoring the business to reduce the prices in order to soothe the life of people of the country. Direct and indirect are two kinds in which for example petroleum price control, electricity, food subsidies such as PDS or availing it for free, agricultural subsidies such as fertilizers are direct subsidies and MNREGA , free education, Indira awash yojana, free drinking water availability etc are of indirect subsidy, The immediate benefits overshadows the real face of subsidy. It is instrument of fiscal policy. Straining the fiscal resources by aiding the public and private sectors rather than involvement of FDI and private sector investment curbs the GDP and leads to chronic extension in long-term and vexing the equilibrium of supply=demand chain.
Instantaneous benefits are the availability of service, competition in business as entrepreneurship will increase so the supply will increase, so the prices will fall. Boosting the public interest to hail the name of government.For example, employment of people for minimum 100 days with non-skilled manual work ballooned up number of jobs, but at the same time fomenting sluggishness and least daily wages even if for skilled work which led to inefficient use of skilled human resource. Placating the petrol price helped the public,the rich and mediocre, to persist in the lifestyle though the poor had no perks and still availing shabby public transport. The earmark of subsidies is never reached. Hydroelectric subsidy ushered energy but the farmers corps remained thirsty.Having mentioned that, the major revenue settling up these are tax revenue, monetizing debts, printing money and bad mortgages. When the tax payers emptying pockets subsequently the the demand decreases, production cost increases so does the prices. GDP growth decreases,for example recent declination of 8.5% to 7.7% after declaration of future service tax hike. Debt crisis occurs for example Greece economic crisis caused due to misplaced subsidies and edifice of capitalization of money. Hitherto printing of money caused the most nefarious sector black money and inflation, as paying more for the same products will only increase the destitution of poor which the opposite of resolution of subsidy hence reliance put in the wrong place. The elucidation of subsidies may not solve the problem but nominating the impartial sectors might resolve it. For example free education, will boost up the skilled resource availability and employment of crowd under BPL, Adhara cards and ration card on the other hand is silver lining, apportioning the needy to avail the subsidized goods attain the true goal. Vitalizing FDI and private investment in public sectors is another raison detre.
Notwithstanding using subsidies as a tool of political benefit to cultivate vote banks. The primary goal ought to be set to miniaturize poverty, kosher way to target the unprivileged , monetizing the private sectors. Subsidies are necessary but impersonating it as evil reliance on the manipulation deed. Agricultural, educational, production aids should not be curbed. Had the motive been to paralize the diminishing of poverty, subsidy would never be named as evil.