A Subsidy is a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low. Governments seek to implement subsidies to encourage production and consumption in specific industries. Since the government helps suppliers through tax credits or reimbursements, the lower overall price of their goods and services is more than offset by the savings they receive. A subsidy is a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government or a targeted tax cut. In economic theory, subsidies can be used to offset market failures and externalities in order to achieve greater economic efficiency.
When the government gives a tax break to a corporation who creates jobs in depressed areas, this is an example of a subsidy. When the government gives money to a farmer to plant a specific farm crop, this is an example of a subsidy. When you are given a partial scholarship to college, this is an example of a subsidy. The objective of subsidy is to bolster the welfare of the society. It is a part of non-plan expenditure of the government. Major subsidies in India are petroleum subsidy, fertiliser subsidy, food subsidy, interest subsidy, etc.
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