23 Topics.
0 of 7 Concepts Done
What to Study: What counts as a subsidy, and why is spending on public goods left out of the definition? Remember the two features of a public good, with examples. Be clear about how subsidising a good differs from providing a public good.
What to Study: Learn the basis of each of the four pairs, and remember a standard example of each type. Which type of subsidy does not appear in the budget document? For instance, how does a direct subsidy differ from an indirect one? What makes a subsidy "merit" or "non-merit"? Remember an example of each.
What to Study: Which are the main subsidy heads in the Union Budget, and what rough share do food and fertiliser take together? Are subsidies capital or revenue expenditure? Understand why the subsidy bill rises when global fertiliser and fuel prices rise, and how a large subsidy bill that is hard to cut leaves less money for capital spending.
What to Study: Understand three problems of price subsidies: they favour richer households (electricity, water and LPG), they distort markets (MSP procurement and the crops left out), and they leak (urea diverted abroad and to industry). Have price subsidies helped the poor face inflation, and have they changed the poor's living standards?
What to Study: How does DBT change the way a subsidy reaches people? Understand the three advantages of paying cash into a bank account over lowering the price of a good. Remember LPG as the leading example.
What to Study: Income support is not tied to buying any particular good. Why is it called non-distorting? In what sense does a DBT linked to one good still distort choices, even though market prices are freed? Remember the five characteristics of a universal basic income, and the three objections raised against it (work incentive, moral hazard and spending on harmful goods).
What to Study: Compare price subsidy, DBT and income support on three tests: are they regressive, do they distort markets, and do they leak? Remember the order in which India adopted them. Does DBT really remove all leakage? Think about the problems that remain, such as exclusion and failed authentication.