EXPLORING SUBSIDIZATION AS A TOOL FOR STIMULATING ECONOMIC GROWTH: AN IN-DEPTH INVESTIGATION

Abstract

Subsidy is a financial incentive given to an individual, business entity, and institution normally by government. Subsidy is usually a direct or indirect payment by government in the form of cash or tax reduction or both. These subsidies are given to remove some sort of economic burden of the general interest. Subsidies are given considering the economic condition of the general public; thus, taking care of the overall interest of the public. Thus, it largely promotes the social good which eventually results in the economic development of a nation. Subsidies can also be used to support a particular sector of nation’s economy. It can assist the poor farmers in their attempt to go for industries by relaxing the financial burden. And by way of subsidies the government encourages new development programs by providing them financial support.

Subsidy therefore plays a key role in the growth of economic development. Subsidies meet the needs of the poor people of tribal areas as well as the needs of the farmers (Gold Smith,1969). Now a days, central government and the state governments sponsor varieties of subsidy schemes to reduce poverty in rural areas. As it is observed, invariably the income of tribal people is lower than their consumption; it hampers their development of standard of living and financial inclusion. Subsidies like food subsidy, electricity subsidy, agricultural subsidy (fertilizer, seeds, power, and credit subsidy), and gas subsidies are given to tribal peoples less than its actual price (market). It is more affordable for rural people who are below poverty line (BPL). Subsidies create positive relationship between agriculture and other related Sectors and facilitate the growth of the state (Millor, 1998). In tribal areas providing subsidies are a must for their livelihood and rehabilitation.