Reforming subsidy

Prime Minister Narendra Modi on Friday asserted his Government will rationalize and target subsidies towards the poor for their welfare and strive for reforms that positively impact the people and transform their lives. While addressing the Global Business Summit in Delhi he stated that India’s economic efforts should also have a positive global impact. Subsidies have been used by the Governments on the plea of providing support to the purchasing power of the poor. However, some believe subsidy has had political underpinning also and helped carving the vote banks and constituencies. The question before Modi Government is of improving the economy without creating bigger difficulties for the poor segment of population. In his opinion all subsidies are not good and he would not take a final position on such matters because we need to address the issue objectively. This is a matter that is not static and difference has to be made between bad and good subsidies. Now if bad subsidies are removed, it does not mean that the Government intends to deprive the genuine persons who need subsidy. There are other ways of compensating which would take the larger number of population into its fold.
This notwithstanding, Centre is conscious of the fact that some subsidies may be necessary to protect the poor and the needy and give them a fair chance to succeed. This is how PM explains his reform concept saying that the aim is not to eliminate subsidies but to rationalize and target them. By targeting them, it is meant to identify the right segments of population who are genuinely in need and entitled to receive the benefit. Ultimately subsidies or no subsidies, any step taken in the name of reforms should bring welfare to the people. Reforms should result in a transformation in the lives of citizens. That precisely is the goal of reform and the biggest beneficiary of any reform should be the poor.
There is great need of creating new opportunities for the people of the country. The reforms which his Government envisages must impact the lives of people for the better. It is the efficient and good governance that will bring greatest benefit to the poor because poor governance hurts the poor more than it hurts others. The FDI in India has increased by 39 percent in the last 18 months, while global FDI has fallen. This is despite the fact that at present, the global economy is going through a period of uncertainty. Referring to subsidy on gas, Modi said as a result of his appeal more than six million consumers had voluntarily surrendered their connections. The surrendered connections were distributed among the poor who did not have such connections. The part of subsidy is deposited in their bank account and in doing so the chanced of corruption and black marketing have been eliminated to a large extent. Similarly the Government intends to sell the kerosene at market rate at selected places and thus reduce demand for subsidized kerosene. This was done in Chandigarh and now Chandigarh city is free of kerosene. This is a step towards rationalization of subsidy. PM said it was strange when support was given to the corporate houses it was called incentive but when same support is given to the poor it is called subsidy. There is no virtual difference and we need not think that by giving the nomenclature of subsidy, we are just making beneficiaries while expecting the corporate houses to take it as incentive. It has also been observed that the universal access to banking through the Jan Dhan Yojana has enabled plugging of huge leakages in subsidies. The important thing to note is that the Prime Minister has declared that 75 per cent of the bank savings on subsidies will be distributed among the States to help them implement the subsidy reforms.

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