Centre and States: Aggregate Budget-based Subsidies
Total non-merit subsidy for the Central and State governments taken together amount to Rs. 102145.24 crore in 1994-95, which is 10.71% of GDP at market prices. The share of Central government in this is 35.37%, i.e. roughly half of corresponding State government subsidies. The recovery-rate for the Centre, in the case of non-merit subsidies, is 12.13%, which is somewhat higher than the corresponding figure of 9.28% for the States. The difference in recovery rates is striking for non-merit social services, being 18.14% for the centre and 3.97% for the States. It is only marginally different for non-merit economic services (11.65% for Centre and 12.87% for States) where, in fact, States do better.
The total non-merit subsidies for the year 1994-95 amounted to 10.71% of GDP at market prices, resulting in a combined fiscal deficit of 7.3% for the Centre, States and Union Territories. Therefore, if these subsidies were phased out, the same would have a discernible impact on the fiscal deficit. It can be done by increasing the relevant user charges, which would also lead to a reduction in their demand. Apart from these first round effects, there would also be positive secondary effects on fiscal deficit, as the overall efficiency in the economy rises with an improved utilisation of scarce resources like water, power and petroleum. With an increase in efficiency, the consequent expansion of tax-bases and rise in tax-revenues would further reduce the fiscal deficit.
Read more about this topic: Subsidies In India
Famous quotes containing the words centre and, centre and/or aggregate:
“The great God absolute! The centre and circumference of all democracy! His omnipresence, our divine equality!”
—Herman Melville (1819–1891)
“To make our idea of morality centre on forbidden acts is to defile the imagination and to introduce into our judgments of our fellow-men a secret element of gusto.”
—Robert Louis Stevenson (1850–1894)
“We think of religion as the symbolic expression of our highest moral ideals; we think of magic as a crude aggregate of superstitions. Religious belief seems to become mere superstitious credulity if we admit any relationship with magic. On the other hand our anthropological and ethnographical material makes it extremely difficult to separate the two fields.”
—Ernst Cassirer (1874–1945)