Subsidy and GDP

Subsidy and GDP

This refers to your edit Investment,not subsidy(ET Jan,26).It is shocking to observe that the subsidy under various heads had touched a staggering figure of Rs,2,19,582 crore ie from 1.4% of GDP in 1999-2000 to 4.1% of GDP in 2008-09.
The subsidy to help the poorest of poor is understandable and needs to be provided and met provided the benefit reaches the beneficiaries directly and without any leakage . Other than food subsidy,all other subsidies presently extended need a re look and deserve to be taken out of budgetary provisions and investments to that extend need to be augmented in the same areas to improve the production,reduce the cost and benefit the consumers and producers alike.
As rightly indicated reforms in the area of investment and subsidy are the only way out to improve the situation and reduce the budgetary expenditure towards subsidies. The benefits that accrue to the economy in general and the weakest sections of the society in particular should be the considerations in arriving at the subsidy and cost to the exchequer. Perhaps food subsidy and kerosene subsidy which are intended for the people below BPL can continue for some more time till the inclusive growth become a reality.Even in these areas transparency in accounting is essential and transfer of benefits directly will bring in tangible benefits.The data relating to people below BPL need to be realistically arrived at so that there is no scope for any leakage.


Dr.T.V.Gopalakrishnan