Why is the financial media so obsessed with the free subsidies for Oil, Food and Fertilizers in India? | LinkedIn Answers | LinkedIn
Why is the financial media so obsessed with the free subsidies for Oil, Food and Fertilizers in India? | LinkedIn Answers | LinkedIn
Why is the financial media so obsessed with the free subsidies for Oil, Food and Fertilizers in India?
In the budget presented by the Indian Finance Minister, the Media showed disappointment when it discovered the the prices of Diesel and LPG had not been raised and therefore their doubts remained over the figures for subsidies that the government gave in the budget document.
Why are commentators so obsessed with the quantum of free giveaways to the public that the government gives...
There is huge merit in these subsidies and it makes robust economic sense because of the way the government works in India....
If the government were forced to cut back on subsidies on Diesel, LPG, Kerosene, Fertilizers and Food, it would have much more cash on its hands....and what would the government do with that money....it would simply employ more people in government....
For example it would open more schools....but we know very well that government school teachers do not come to schools to teach but only for collecting their salaries...
Government could also employ more bureaucrats it is various departments....these officials are trained to prevent productive sectors of the economy from working...so more government employees would translate into more effective throttling of the economy....
Somebody needs to conduct a study to ascertain how much the GDP of India declines for every additional person the government employs....
It is therefore far better to give away the money to people as subsidies rather than tempt the government to expand its operations with the money...
It seems to most people that subsidies create deficits which create inflation which create high interest rates which retard growth...the truth however may be different....the absolute level of government spend is perhaps determined by political clamor....if the subsidies are cut, the money just goes into something else....some other schemes like more non functional schools, more bribe extorting policemen...etc...
Subsidies look like a relatively cleaner form of waste...
Why are commentators so obsessed with the quantum of free giveaways to the public that the government gives...
There is huge merit in these subsidies and it makes robust economic sense because of the way the government works in India....
If the government were forced to cut back on subsidies on Diesel, LPG, Kerosene, Fertilizers and Food, it would have much more cash on its hands....and what would the government do with that money....it would simply employ more people in government....
For example it would open more schools....but we know very well that government school teachers do not come to schools to teach but only for collecting their salaries...
Government could also employ more bureaucrats it is various departments....these officials are trained to prevent productive sectors of the economy from working...so more government employees would translate into more effective throttling of the economy....
Somebody needs to conduct a study to ascertain how much the GDP of India declines for every additional person the government employs....
It is therefore far better to give away the money to people as subsidies rather than tempt the government to expand its operations with the money...
It seems to most people that subsidies create deficits which create inflation which create high interest rates which retard growth...the truth however may be different....the absolute level of government spend is perhaps determined by political clamor....if the subsidies are cut, the money just goes into something else....some other schemes like more non functional schools, more bribe extorting policemen...etc...
Subsidies look like a relatively cleaner form of waste...
posted by Unknown at 11:49 PM
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