An Explainer: Subsidy

A subsidy is a benefit that a government provides individuals and industries to promote social welfare

PropGuide explains sudsidy

What is a subsidy? As a public-welfare policy, governments across the world provide benefits to individuals and industries. These are known as subsidy. In simple terms, a subsidy is the opposite of a tax. Subsidy benefits are generally extended in the form of tax deductions and cash payments. According to the Merriam-Webster dictionary, subsidy is the money paid usually by a government to keep the price of a product or service low or to help a business or organisation continue to function. A subsidy could be in the form of welfare payments and various mortgages and loans.

To promote domestic industries, governments often subsidise them. This is to make them competitive in global markets. Since Independence, India, as part of its fiscal policy, has been subsidising products from food to fuel. For example, housing for the urban poor in India is highly subsidised. This is done by the government to promote socio-economic equality. However, subsidies in general have been a subject of heated debate in recent times because they cause a huge hit to the government exchequer.

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