Subsidies: Magic bullet?

Abstract

The present macroeconomic debate in India has largely focused on growth and inflation. The economic policies undertaken by the exited UPA government and incoming NDA government have been heavily scrutinised for their delivery on its promises of sustained growth and whether the arguments by the then opposition NDA government are now being acted upon to bring around Achhe din, as announced. Most of the policies have been largely populist till date, with subsidies providing immediate benefit to the marginal section of the population, but impeding the various growth statistics of the country. While the subsidy is marked out to the poor and the hungry, but is the last man in the village still sleeping hungry? Probably, yes. There is lack of transparency and accountability and thereby, it is imperative to identify the effective policy framework in the context of subsidies to tighten the system such that there are no leakages, and subsidies are targeted to the deserving section of the society. This study covers a comprehensive analysis of the subsidy program in India. It deep dives into the individual components of the subsidy, scrutinises the rationale and observes the loopholes and issues that exist in the system. Finally, the study aims to focus on the food subsidy program, its efficacy and suggests recommendations for improvement.