Subsidies aren't best weapon to tackle poverty: Economic Survey

Posted on 27th Feb 2015 by mohit kumar

New Delhi, Feb 27 (IANS) Price subsidies did not have a transformative effect on the living standards of the poor, though they helped poor households to weather inflation and price volatility, the Economic Survey for 2014-15 revealed here Friday.

"A close look at price subsidies, which are estimated to be about Rs.378,000 crore, about 4.24 percent of GDP (gross domestic product), reveal that they may not be the government's best weapon for fighting poverty," the survey, which was tabled by Finance Minister Arun Jaitley in parliament, said.

Dwelling upon various subsidies to the poor, the survey even stated that these are often regressive.

"An analysis of the current subsidy scheme indicates that rich households benefit more from the subsidy than a poor household," it said.

Among various examples that it had dwelt upon, the survey said subsidy on electricity can only benefit the relatively rich.

The survey, however, concluded that eliminating or phasing down subsidies is neither feasible nor desirable. "By adopting what it called the JAM Number Trinity - Jan Dhan Yojana, Aadhaar and mobile numbers - would allow the state to deliver the subsidies to poor in a targeted and less distorted manner," it added.

"Rationalisation of subsidies, better targeting of beneficiaries will release funds for public investment in agriculture," the survey said.

"Converting all subsidies into direct benefit transfers is a laudable goal of government policy," it added.

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