The Indian Subsidy Debate - Why or Why Not?

Abstract

Subsidies are usually criticized for the burden they cause on the budget of the government. However, considering that the majority of the Indian population spends heavily on the items that are subsidized, a reduction in the subsidies could distort their budgets in a significant manner.This paper tries to capture the arguments that are usually made on the subsidies and tries to analyse the issue in greater detail. Further, the paper proposes that rather than focusing on the expenditure side of the budget, we should try and think of possible ways of augmenting the tax revenues through better implementation and collection of the direct taxes.