General Knowledge - Indian Economy - Discussion

The right answer A.

Subsidies are those payments of govt to the enterprises or individuals which does not requires repayment. Govt provide susidiy to promote enterpreneurship and economic activites and for the economically weaker sections.

The answer should be A.

Subsidies is the balancing mechanism in order the bring the Average Purchasing Power on par with the Market Price.
In economics, subsidy is a necessity because it acts as a catalyst in increasing the demand.
The Politics of Subsidy is that, it helps to achieve one of the principles of Directive principles of State Policy.
Also, subsidy cannot be abolished but it can certainly be rationalized.

Subsidies basically are referred as negative taxes.. here generally the govt. lowers the market price..

For example- suppose the price of LPG cylinder is rs.250.. now for promotion measures it reduces the price to rs.200.. then demand increases but however it gives rs.50 for each cylinder to the manufacturer.. this rs.50 is called the subsidies provided by the govt.