Subsidies in India - Subsidies of State Governments

Subsidies of State Governments

Subsidies given by 15 non-special category States were estimated for 1993-94, the latest year for which reasonably detailed data were available for all these States. The trends thrown up by the study are:

• Subsidies in social services and economic services both constitute half each of the total subsidies given by the States.
• The proportion of merit subsidies is much higher in social services vis-à-vis economic services.
• The overall recovery rate is 5.81% of the total cost (less than 2% in social services and approx. 9% in economic services).
• There is a distinct tendency for the per capita subsidies to rise as the per capita incomes rise.
• None of the 15 States spends more than 30-35% of total subsidies on merit goods.
• The recovery rates for merit services show variation in a narrow band whereas the largest variations are recorded for recovery rates for non-merit economic services.
• The near zero surpluses for all services show that subsidies are mainly financed by tax-revenues and borrowing in the States.
• More than one-fifth of non-merit social subsidies accrue to education, sports and art & culture.
• In economic services, irrigation accounts for nearly a quarter of services whereas power accounts for around 12%.
• Lastly, subsidies to States' public enterprises are large but recovery in the form of interests and dividends is extremely low.