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Rationalizing Subsidies in India

Comprehensive Overview of India’s Subsidy Landscape and Reforms

Introduction: India’s subsidy landscape has evolved significantly, incorporating key reforms like fuel price deregulation, targeted LPG subsidies, and technology-driven delivery systems. However, inefficiencies persist in food and fertilizer subsidies, highlighting the need for rationalization. Explicit subsidies have decreased from 12.7% of the budget in FY23 to 9.3% in FY24, with the aim to reduce them further below 1% of GDP.

Why is This News Relevant?

The article highlights the importance of subsidy reforms in tackling rising fiscal challenges and addressing global scrutiny. For students preparing for competitive exams, it provides valuable insights into India’s evolving subsidy policies and reform strategies, shedding light on the country’s economic priorities and decision-making processes.

Key Points for Prelims:

  • Subsidy Schemes:
    • Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY): Free grains distribution.
    • PM-KISAN Samman Nidhi: Financial assistance to farmers.
    • Nutrient-Based Subsidy (NBS): Fertilizer price regulation.
    • Production Linked Incentive (PLI) Scheme: Promotes industrial growth.
    • PM-KUSUM: Solar energy adoption for farmers.
    • FAME-II Scheme: Electric vehicle adoption incentives.
    • Vanbandhu Kalyan Yojana: Tribal welfare.
    • Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana: World’s largest health insurance scheme.

Subsidies Defined:

  • Subsidy: Financial assistance provided by the government to promote welfare, economic growth, and equity.
    • Types: Direct (cash payments) or Indirect (tax breaks, price support).

Types of Subsidies:

  • Direct Subsidies: Financial transfers to beneficiaries. Example: PM-KISAN.
  • Indirect Subsidies: Tax exemptions or reduced duties. Example: Section 80C tax exemptions.
  • Input-Based Subsidies: For fertilizers, seeds, electricity. Example: NBS.
  • Consumption-Based Subsidies: Affordable essential goods. Example: Subsidized grains under NFSA.
  • Production-Linked Subsidies: Boost production. Example: PLI Scheme.
  • Export Subsidies: Encourage exports. Example: RoDTEP Scheme.
  • Climate and Environmental Subsidies: Promote eco-friendly practices. Example: Subsidies under PM-KUSUM.
  • Food and Nutritional Subsidies: Ensure food security. Example: Midday Meal Scheme.

Advantages of Subsidies:

  1. Ensuring Food Security and Alleviating Hunger:
  • PMGKAY distributes free grains to 810 million beneficiaries.
  • Food subsidy expenditure projected at ₹2.25 lakh crore in FY25.
  1. Supporting Farmers and Enhancing Productivity:
  • Fertilizer Subsidies: Shield farmers from inflation.
    • Special subsidy of ₹3,500 per tonne on DAP extended for 2025.
  • Pradhan Mantri Krishi Sinchayee Yojana (PDMC): Financial assistance for irrigation systems.
  1. Promoting Clean Energy:
  • PM-KUSUM: Solar pumps reduce diesel reliance.
  • Subsidies under FAME-II: Over 1.67 million EVs sold in FY24.
  1. Affordable Healthcare:
  • Ayushman Bharat: Provides ₹5 lakh/family annually for hospitalization.
  1. Reducing Inequality:
  • Ujjwala Yojana: Provides clean cooking fuel to 9.6 crore households.
  1. Spurring Industrial Growth:
  • PLI Scheme: Allocated ₹1.97 lakh crore across 14 sectors, generating 60 lakh jobs.
  1. Environmental Sustainability:
  • Subsidies reduce greenhouse gas emissions.
  • Namami Gange initiatives improve river health.
  1. Enhancing Education:
  • Scholarships for SC/ST students improve enrollment rates.
  1. Empowering Women:
  • Janani Suraksha Yojana: Reduced maternal mortality rates to 97 per lakh live births (2018-20).
  1. Bridging the Digital Divide:
  • PM-WANI: Ensures rural connectivity.

Challenges of Subsidies:

  1. Fiscal Strain:
  • Subsidies accounted for ₹4.1-4.2 lakh crore in FY25.
  • Health spending remains at 1.84% of GDP, below the global average of 6%.
  1. Poor Targeting and Leakages:
  • 40% of subsidized food grains diverted to markets.
  1. Resource Overuse:
  • Free electricity leads to groundwater depletion.
  • Fertilizer overuse damages soil health.
  1. Market Distortions:
  • Disincentivizes innovation.
  1. Transparency Issues:
  • Delays in subsidy payments increase fiscal liabilities.
  1. WTO Criticism:
  • Farm subsidies alleged to distort global trade.
  1. Populism:
  • Freebies undermine long-term sustainability.

Reforms for Efficient Subsidy Management:

  1. Direct Benefit Transfer (DBT):
  • Proven success in LPG under PAHAL.
  • Extending DBT to fertilizers reduces misuse.
  1. Dynamic Targeting:
  • Periodic beneficiary revision using SECC and AI-based data verification.
  1. Sustainable Alternatives:
  • Promote nano urea to save ₹10,000–15,000 crore annually.
  • Link solar irrigation with fertilizer DBT under PM-KUSUM.
  1. Technology Integration:
  • GIS mapping ensures subsidies reach genuine cultivators.
  • Blockchain enhances PDS transparency.
  1. Environmental Alignment:
  • Replace free electricity with time-bound, metered power.
  1. Public-Private Partnerships (PPP):
  • Collaborations improve infrastructure and distribution networks.
  1. Crop Diversification:
  • Incentivize pulses and oilseeds over water-intensive crops.
  1. Graduated Exit Plans:
  • Gradual subsidy withdrawal for self-sufficient beneficiaries.

Conclusion:

India’s subsidy system plays a pivotal role in fostering development and ensuring equity. However, inefficiencies, fiscal strain, and environmental concerns necessitate comprehensive reforms. By leveraging technology, encouraging sustainable practices, and implementing targeted measures, the subsidy framework can achieve better efficiency and inclusivity.

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ISRO successfully conducts its SpaDEX (Space Docking Experiment)

ISRO successfully conducts its SpaDEX (Space Docking Experiment)

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18. India became the ____ country to demonstrate space docking after the US, USSR, and China.

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ISRO successfully conducts its SpaDEX (Space Docking Experiment)

ISRO successfully conducts its SpaDEX (Space Docking Experiment)

The number of attempts remaining is 2

1 / 20

1. How does ISRO's space docking contribute to future human space exploration?

2 / 20

2. What is the expected launch year for the Bharatiya Antarix Station's first robotic module?

3 / 20

3. What system enables autonomous rendezvous and docking in space?

4 / 20

4. What is the maximum distance achieved during the controlled approach of the two satellites in ISRO's experiment?

5 / 20

5. Which country has launched a 40,000-ton naval ship in record time, demonstrating advanced manufacturing?

6 / 20

6. What term describes the sharing of electrical power between two docked satellites?

7 / 20

7. Which Indian lunar mission will involve docking capability for bringing back lunar samples?

8 / 20

8. Which space docking capability is required for constructing the Bharatiya Antarix Station?

9 / 20

9. What altitude were the satellites maintained at during ISRO's docking experiment?

10 / 20

10. How many kilograms did each satellite used in ISRO's docking experiment weigh?

11 / 20

11. What is the primary purpose of the docking capability for India's future lunar missions?

12 / 20

12. Which two satellites were used by ISRO to demonstrate space docking?

13 / 20

13. What year did NASA first demonstrate space docking through the Gemini VIII mission?

14 / 20

14. Which of the following nations first demonstrated autonomous space docking?

15 / 20

15. Why is docking capability critical for space exploration?

16 / 20

16. What does 'low impact docking' signify in ISRO's context?

17 / 20

17. What is the name of the mission through which ISRO achieved space docking?

18 / 20

18. India became the ____ country to demonstrate space docking after the US, USSR, and China.

19 / 20

19. What is 'space docking' in space exploration?

20 / 20

20. Which Indian organization recently achieved 'space docking'?

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