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Economic Survey 2015: Rich households benefit more from subsidies than poor

IANS     February 27, 2015

The Economic Survey 2014-15, which was tabled in the Parliament by Finance Minister Arun Jaitley on Friday, revealed that 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.

"A close look at price subsidies, which are estimated to be about Rs 378,000 crore, about 4.24 per cent of GDP (gross domestic product), reveal that they may not be the government's best weapon for fighting poverty," the report said.

Dwelling upon various subsidies to the poor, it 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," the survey said.

Among various examples that it had dwelt upon, the Economic 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 report said.

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


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