What Do You Mean By Subsidy? (Solution found)

What does mean by subsidy?

  • Subsidy(noun) support; aid; cooperation; esp., extraordinary aid in money rendered to the sovereign or to a friendly power. Subsidy(noun) specifically: A sum of money paid by one sovereign or nation to another to purchase the cooperation or the neutrality of such sovereign or nation in war.

What isthe meaning of subsidy?

A subsidy is a benefit given to an individual, business, or institution, usually by the government. The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public, given to promote a social good or an economic policy.

What is subsidy with example?

Definition: Subsidy is a transfer of money from the government to an entity. It leads to a fall in the price of the subsidised product. It is a part of non-plan expenditure of the government. Major subsidies in India are petroleum subsidy, fertiliser subsidy, food subsidy, interest subsidy, etc.

Why subsidy is given?

Basically, subsidies are provided by the government to specific industries with the aim of keeping the prices of products and services low for people to be able to afford them and also to encourage production and consumption.

What is subsidy and its types?

In most common parlance, Subsidy means grant. The various forms of subsidy include direct subsidies such as cash grants, interest-free loans; indirect subsidies such as tax breaks, premium free insurance, low-interest loans, depreciation write-offs, rent rebates etc.

Is subsidy a loan?

Subsidy can be availed on home loans that were approved on or after 1 January 2017. Applicants who fall under MIG – I category can avail subsidy at the rate of 4% with the maximum loan amount being Rs. 9 lakh. The maximum loan term taken into consideration for calculation of subsidy is 20 years.

What are incentives and subsidies?

The term “incentive’, generally means encouraging productivity. It is a motivational force, which encourages an entrepreneur to take a right decision and act upon it. “Subsidy” means a single lump sum of money that is given by a Government to an entrepreneur to cover the cost.

What are the 4 main types of subsidies?

Subsidies come in various forms including: direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, accelerated depreciation, rent rebates). Furthermore, they can be broad or narrow, legal or illegal, ethical or unethical.

Who receives government subsidies?

While many industries receive government subsidies, three of the biggest beneficiaries are energy, agriculture, and transportation.

Is subsidy an income?

(a) Subsidy shall be recognised as an income of an Assessee as per Section 2(24)(xviii) of the Act, unless the same falls in the exclusion any part the Section 2(24)(xviii) of the Act.

Do you have to pay back a subsidy?

For 2020, excess subsidies do not have to be repaid. And for 2021 and 2022 only, the ARP allows people with income above 400% of the poverty level to qualify for premium subsidies.

What is subsidized in the US?

Government subsidies are financial grants extended by the government to private institutions or other public entities, in order to stimulate economic activity or promote activities that are in the public good.

Subsidy Definition

A subsidy is a benefit that is provided to an individual, business, or institution, and is generally provided by the federal government. It can be either direct (as in cash payments) or indirect (as in credit card payments) (such astax breaks). It is customary for a subsidy to be provided in order to relieve some form of burden, and it is frequently deemed to be in the general public’s best interests when it is provided to promote a social good or an economic policy.

Key Takeaways

  • A subsidy is a direct or indirect payment made to individuals or businesses by the government, which is typically in the form of a cash transfer or a targeted tax reduction. Subsidies, according to economic theory, can be used to compensate for market failures and externalities in order to achieve higher economic efficiency. But opponents of subsidies point to difficulties in estimating appropriate subsidies, dealing with unexpected expenses, and avoiding political incentives from making subsidies more costly than they are useful.

Understanding Subsidy

A subsidy is typically some type of payment made to an individual or corporate organization that is receiving it, whether it is delivered directly or indirectly. Subsidies are often regarded as a special sort of financial assistance because they relieve the recipient of an associated burden that had previously been imposed on him or her, or because they encourage a certain conduct by giving financial support. Subsidies have an opportunity cost associated with them. Consider the agricultural subsidies provided during the Great Depression: it had highly apparent impacts, with farmers reporting increased earnings and the hiring of extra staff.

Money from the subsidies had to be deducted from individual income tax returns, and customers were stung a second time when food costs rose at the supermarket.

Types of Subsidies

Subsidies are often used to benefit specific sectors of a country’s economy. If it can alleviate the pressures put on faltering sectors, it can also promote new advances by giving financial assistance for their initiatives. Frequently, these regions are not adequately supported by the operations of the main economy, and they may even be undermined by activity in other economies.

Direct vs. Indirect Subsidies

Direct subsidies are those that entail the direct payment of monies to a specific individual, organization, or industry. They are also known as direct payments. Those that have no preset monetary value or that do not entail real financial outlays are referred to as indirect subsidies. They can include initiatives like as price reductions for essential products and services, which can be funded by the government, among other things. This permits the necessary commodities to be acquired at a lower cost than the current market rate, resulting in savings for individuals who are intended to benefit from the subsidy.

Government Subsidies

Those subsidies that entail the actual delivery of monies to a specific individual, group, or enterprise are referred to as “direct subsidies.” Those that have no preset monetary value or that do not entail real financial outlays are referred to as “indirect subsidies.” Price reductions for essential products and services, which can be subsidized by the government, are examples of such actions. These things can be acquired at a lower cost than the current market rate, resulting in savings for individuals who are intended to benefit from the subsidy program.

Advantages and Disadvantages of Subsidies

Public subsidies are justified on a variety of grounds: some are economic in nature, others are political in nature, and still others derive from socio-economic development theories. In accordance with development theory, certain industries require protection from foreign competition in order to maximize domestic advantage. Technically speaking, a free market economy is one that is devoid of subsidies; the introduction of a subsidy changes a free market economy into a mixed economy.

Economics and politicians frequently dispute the advantages of government subsidies, and by extension the extent to which a mixed economy should be allowed to exist in a given country.


Pro-subsidy Economists say that providing subsidies to certain industries is essential for assisting in the support of firms and the employment they produce. The mixed economy is supported by economists who think that subsidies are justified in order to offer the socially optimal level of goods and services, which will lead to economic efficiency as a result of the mixed economy. In modern neoclassical economic models, there are instances in which the real supply of an item or service goes below the theoreticalequilibriumlevel, resulting in an undesired shortage and what economists refer to as a market failure.

  • The subsidy decreases the cost of bringing the item or service to market for the producers who receive it.
  • In other words, according to general equilibrium theory, subsidies are required when a market failure results in an insufficient amount of output in a particular area of the country.
  • Some claim that commodities or services produce what economists refer to as “positive externalities,” which are beneficial to the economy.
  • However, because the third party is not a direct participant in the decision, the activity will only take place to the degree that it directly helps those who are directly engaged, leaving potential societal benefits on the table as a result of this.
  • The inverse of this type of subsidy is the imposition of a charge on activities that generate negative externalities.
  • This is a common approach that is now being used in China and other South American countries.


Other economists, on the other hand, believe that free market forces should determine whether a company survives or fails. Even if it fails, the resources are redeployed to a more efficient and lucrative application. It is their contention that subsidies to these enterprises just serve to maintain an inefficient allocation of scarce resources. Subsidies are viewed with suspicion by free market economists for a variety of reasons. Many people believe that government subsidies needlessly distort markets, limiting efficient results and diverting resources away from more productive applications and onto less productive ones.

  1. Official expenditure on subsidies, according to some critics, is never as successful as government predictions indicate it would be.
  2. Another issue, as critics point out, is that the act of subsidizing contributes to the corruption of the democratic process.
  3. Companies frequently seek protection from the government in order to protect themselves from competition.
  4. Even if a subsidy is introduced with the best of intentions, without any hint of conspiracy or self-interest, it increases the earnings of those who benefit from it, creating an incentive to fight for its continuation long after the necessity or utility of the subsidy has passed.

As a result, political and commercial interests might possibly gain from one another at the expense of taxpayers and/or competitors in their respective fields of endeavor.

Special Considerations

There are a number of different metrics that may be used to assess the success of government subsidies. Most economists regard a subsidy to be a failure if it does not result in a general improvement in the economy. Policymakers, on the other hand, may still deem it a success if it aids in the achievement of a different goal. Despite the fact that most subsidies are long-term failures in the economic sense, they nonetheless accomplish cultural or political objectives. When it comes to the Great Depression, we may see an illustration of these opposing assessments.

  1. Their policy objective was to keep food prices from dropping further and to safeguard small farmers from being harmed.
  2. However, the economic ramifications were completely different.
  3. Those who did not work in the agricultural business fared badly in terms of absolute economic well-being.
  4. Subventions for renewable (non-oil-based) energy sources totaled more than $60 billion in the United States Department of Energy (DOE) fiscal years 2012 and 2013.
  5. The receiving firms, on the other hand, were unable to generate a profit, and oil prices fell in 2014.
  6. People who directly or indirectly benefit from subsidies tend to be the greatest supporters of them, and the political motivation to “bring home the bacon” to ensure support from special interests is a potent magnet for politicians and policymakers alike to support them.

Wha is the difference between direct and indirect subsidies?

Direct subsidies are those that entail the direct payment of monies to a specific individual, organization, or industry. They are also known as direct payments. Those that have no preset monetary value or that do not entail real financial outlays are referred to as indirect subsidies. These can include efforts like as price reductions for essential products and services, which can be funded by the government in some cases.

What is the position of subsidy advocates?

Those subsidies that entail the actual delivery of monies to a specific individual, group, or enterprise are referred to as “direct subsidies.” Those that have no preset monetary value or that do not entail real financial outlays are referred to as “indirect subsidies.” It is possible to receive government assistance for initiatives such as price reductions for essential products and services.

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What is the position of subsidy opponents?

Subsidies are prohibited in a free market economy, at least on a technical level. If a firm survives or fails, opponents of government subsidies believe that market forces should be the determining factor. If it fails, those resources will be redistributed to a more efficient and profitable use in the future. They contend that subsidies unduly distort markets by diverting resources away from more productive applications and onto less productive ones, so preventing efficient outcomes from occurring.

Definition of SUBSIDY

The city is boosting the amount of money it spends on public transportation. In the event of a crop failure, the government provides subsidies to farmers. Recent Web-based illustrations The Australian federal government will provide a subsidy to the series in the amount of $11.5 million (A$16 million). —Patrick Frater, in Variety on January 24, 2022. According to the school, its level of institutional assistance, which was $42.6 million of a $47.2 million subsidy in FY2021, is expected to decline to $33.6 million in FY2022, from $42.6 million in FY2021.

  1. —Noah Millman, The Week, December 12, 2021.
  2. Casey Mulligan, Wall Street Journal, 9 December 2021 This perk is predicted to cost the taxpayers $22 billion a year in subsidies.
  3. theBostonGlobe.com, August 15, 2021 Owners are signing up for retrofits without the assistance of the government as a result of the significant energy savings (although a solarsubsidyis available).
  4. The average monthly rent subsidy provided by a voucher is $650, allowing low-income families to live in better-quality homes while maintaining their financial stability.
  5. It is not the opinion of Merriam-Webster or its editors that the viewpoints stated in the examples are correct.

Definition of subsidy

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This indicates the grade level of the word based on its difficulty. / sb s d I / sb s d I This indicates the grade level of the word based on its difficulty. noun,pluralsub·si·dies. a direct financial assistance provided by a government to a private industrial endeavor, a charitable organization, or other such institution a quantity of money given by one government to another, usually in compliance with a treaty, in order to get some service in exchange a financial gift or commitment of funds money that was previously provided to the crown by the English Parliament for certain purposes EVALUATE YOUR KNOWLEDGE OF AFFECT AND EFFECT VERSUS AFFECT!

In effect, this exam will determine whether or not you possess the necessary abilities to distinguish between the terms “affect” and “effect.” Despite the wet weather, I was in high spirits on the day of my graduation celebrations.

Origin ofsubsidy

It was first reported in 1325–75; Middle English subsidie, from Anglo-French subsidium, from Latin subsidium “auxiliary power, reserve, or assistance,” corresponding to the prefix sub-sub-+sid-, a combining form ofsedre “to sit”; first attested in 1325–75. (seesit 1) +-ium-ium

synonym study for subsidy

1.Subsidy and subsidy are both financial assistance provided to private enterprises by governments, often in the form of grants of money. When a subsidy is provided, it is normally to encourage commercial business, such as a subsidy to manufacturers during a war. A subvention is often a grant given to businesses that are associated with science and the arts, such as a grant given to a research chemist by a prominent corporation.


An·ti·sub·si·dy,noun,pluralan·ti·sub·si·dies. non·sub·si·dy,noun,pluralnon·sub·si·dies.

Words nearbysubsidy

Subsidiary coin, subsidiary company, subsidiary ledger, subsidiary rights, subsidize, subsidy, subsist, subsistence, subsistence allowance, subsistence farming, subsistence level, subsidized coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin Dictionary.com Unabridged Random House, Inc.

  • 2022, based on the Random House Unabridged Dictionary, Random House, Inc. A It is a direct payment provided by a government to a firm or other organization in the form of support to those organizations and companies.
  • State and local governments that offer subsidies frequently target them towards certain industries, such as farming.
  • More broadly, the term “subsidy” can apply to any gift or monetary contribution of any kind.
  • Using the above example, my firm was awarded a government subsidy to assist in expediting the manufacture of healthcare items.

Where doessubsidycome from?

The oldest written mention of the word subsidy dates back to the 1300s. It ultimately stems from the Latin term subsidium, which means “auxiliary power,” “reserve,” or “assistance” in English. As a general rule, subsidies are intended to assist in the provision of funding to enterprises in a certain industry, with the purpose of assisting that industry in thriving—so that it can create employment or otherwise drive economic growth. Subsidies come in a variety of forms, although the term is most commonly linked with payments made by the government.

The United States government provides subsidies to a wide range of businesses, including fossil fuel firms, military contractors, and automotive manufacturers.

How issubsidyused in real life?

Is the word subsidy properly used in the following sentence?

These subsidies may benefit multibillion-dollar firms, but we should examine if they benefit ordinary individuals as well.

Words related tosubsidy

Aid, allowance, appropriation, assistance, bonus, contribution, endowment, financial aid, gift, grant, payment, pension, premium, scholarship, support, alimony, bequest, bounty, fellowship, and gratuity are all terms that can be used to describe financial help.

How to usesubsidyin a sentence

  • State and municipal governments have provided Amazon with approximately $3 billion in subsidies in total. She implemented a company-wide 30 percent wage cut on around 120 employees in July, despite the fact that she had received tax breaks and employment subsidies from the government intended to assist businesses in surviving the epidemic. It’s essentially about government subsidization and cost management, which is something we’ve never done before in this nation. If the state subsidy does not cover the entire cost of the treatment, there may be a co-pay.
  • The rule offering free garbage collection to single-family houses is primarily a subsidy for homeowners, despite the fact that some rich condo owners are barred from receiving the service and some low-income individuals benefit from it. Welfare expenditure deters people from working, raises taxes, and serves as a covert and wasteful subsidy to low-wage firms, among other things. Another way of putting it is that this subsidy provides the United States with clout over the decision-making of a vital ally. We must devise a method of financial support that will allow music and parallel arts to flourish without fear of repercussions. The ownership, operation, regulation, and subsidization of schools and colleges by the government should be phased out
  • Increased premiums might be passed on to customers, and increased subsidy expenses could be passed on to taxpayers. In light of Frederick’s refusal to make any commitments on the circumstances on which he would make peace, the British government declined to provide the subsidies. We may receive another subsidy from the House of Commons, which will make ae accounting of it easier
  • “Yes,” the diplomat said, “and he is the only one among them who does not want any subsidies
  • ” You can refer to it as a subsidy or an imperial contribution
  • But, it is not a benefit because the recipient cannot think about it without feeling embarrassed. The history of the subsidy provides valuable insight into the trends in direct taxes in all nations.

British Dictionary definitions forsubsidy

The term refers to financial assistance provided by a government to industry for reasons of public well-being, the balance of payments, or other considerations. History of the English language financial transfer to the Crown made by Parliament initially for specific purposesany monetary contribution, grant, or help provided by an individual or organization

Word Origin forsubsidy

The term “subsidie” comes from the Anglo-Norman “subsidie,” which comes from the Latin “subsidiumassistance,” and the verb “subsidre” means “to stay.” Complete Unabridged Digital Edition of the Collins English Dictionary, published in 2012. William Collins Sons Co. Ltd. was established in 1979 and 1986. In 1998, HarperCollinsPublishers published the following books: 2000, 2003, 2005, 2006, 2007, 2009, and 2012.

Cultural definitions forsubsidy

A grant given by a government to a person or company in order to maintain a reasonable quality of life or to foster economic growth is known as a social grant. The Third Edition of The New Dictionary of Cultural Literacy is now available. Houghton Mifflin Harcourt Publishing Company acquired the copyright in 2005. Houghton Mifflin Harcourt Publishing Company is the publisher of this book. All intellectual property rights are retained.


A subsidy is a financial or tax benefit provided by the government to individuals or enterprises in the form of cash, grants, or tax breaks, among other things. Direct Taxes A direct tax is a form of tax that an individual pays to the government that is paid directly to the government. Examples of direct taxes include income tax, poll tax, property tax, and tax credits that help to increase the supply of specific goods and services. Subsidies enable customers to obtain lower-priced goods and services by reducing competition.

Externality An externality is a cost or benefit of an economic activity that is experienced by a third party that is not involved in the economic activity.

Fiscal Policy is a term that is used to refer to a set of rules that govern how money is spent.

Essentially, subsidies are financial assistance provided by the government to certain businesses with the goal of keeping the prices of goods and services low so that consumers can afford them while simultaneously encouraging the production and use of such goods and services.

Types of Subsidies

This form of subsidy is offered in order to stimulate the development of a certain product or service. In order for manufacturers to raise their production output, the government pays them for some of the costs associated with doing so.

This allows them to reduce their costs while simultaneously raising their output. As a consequence, both output and consumption increase, but the price remains stable or slightly higher. The disadvantage of such an incentive is that it has the potential to encourage overproduction.

2. Consumption subsidy

This occurs when the government provides financial assistance to cover the costs of food, education, healthcare, and water.

3. Export subsidy

A well-known truth is that a country or state makes money from its exports, and that exports contribute to the overall health of the economy. As a result, the government subsidizes the cost of exports in order to encourage them. However, this may be readily misused, particularly by exporters who inflate the cost of their goods in order to earn a higher incentive, so increasing their profits at the expense of taxpayers and ultimately rising their overall profits.

4. Employment subsidy

This tax credit is provided by the government to businesses and organizations in order to encourage them to create additional job possibilities for their employees.

Advantages of Subsidies

They are particularly useful in the area of production cost inputs such as fuel costs, which is particularly relevant at a time when global crude oil prices are on the rise. Fuel expenses are heavily subsidized in many nations in order to keep prices from skyrocketing.

2. Preventing the long-term decline of industries

There are several businesses that should be maintained alive and functional, such as fishing and farming, because they are critical to the survival of a society’s inhabitants. Many emerging and rapidly expanding sectors may also benefit from government support.

3. A greater supply of goods

Governments strive to expand the availability of goods and services to its citizens, such as water, food, and education, among other things. The incentive they give might be in the shape of a tax credit or even in the form of cash directly to the customer. Markets with positive externalities are those that are profitable. Externality An externality is a cost or benefit of an economic activity that is experienced by a third party that is not involved in the economic activity. Those who do not bear the external cost or advantage are typically the ones who profit from such benefits.

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Disadvantages of Subsidies

Despite the fact that one of the benefits of subsidies is an increased supply of products, a scarcity of items can also emerge as a result of subsidies. This is due to the fact that decreased pricing might result in a rapid increase in demand, which many companies may find extremely difficult to satisfy. In the end, it might result in a significant increase in demand, which in turn produces a rise in prices.

2. Difficulty in measuring success

Most of the time, subsidies are useful and beneficial. However, if the government were to publish a report on the success it has had in utilizing subsidies, the story would be quite different. This is due to the fact that it is difficult to assess the effectiveness of subsidies.

3. Higher taxes

What methods will the government employ to raise revenue for the purpose of supporting industries? Of course, this will be accomplished by increasing taxes. The general public and companies are therefore responsible for providing the resources necessary to allow the government to support industries.

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  • Loss of Deadweight Loss of Deadweight In economics, deadweight loss refers to the reduction in economic efficiency that occurs when the ideal level of supply and demand is not reached. To put it another way, it is
  • Supply and demand are two sides of the same coin. Supply and demand are two sides of the same coin. The rules of supply and demand are microeconomic ideas that assert that in efficient markets, the amount of an item provided and the quantity demanded are equal. Externality Externality An externality is a cost or benefit of an economic activity that is experienced by a third party that is not involved in the economic activity. Although the external cost or benefit is not included, The Influence of a Network The Influence of a Network Generally speaking, the Network Effect is a phenomena in which current consumers of a product or service gain in some manner when the product or service is adopted by more users. Several users contribute to the creation of this impact when they bring value to their use of a particular product. In the case of the Internet, it is the greatest and most well-known example of a network effect.


In addition to the United States, several other nations are grappling with energy subsidies. In order to enhance rent income while decreasing subsidies, a building might have both market-rate and affordable units. If you want to do so, you can maintain your service pricing the same as it is currently while still receiving the phone subsidy. In addition, I discuss how the old subsidymodel has been reducing carrier earnings over the years. As a result, additional subsidies will be demanded in the future.

  1. Fossil fuels received around $550 billion in worldwide subsidies in 2013, falsely decreasing consumer prices and making it more difficult for renewable energy to compete on a global scale.
  2. Housing subsidies, on the other hand, kept 2.8 million individuals out of poverty in the past year.
  3. The enforcement of competition laws will ensure that subsidies are well-designed and cost-effective in their implementation.
  4. These samples are drawn from corpora as well as from other online sources.

What is a subsidy? Definition and meaning

A subsidy is a sum of money that is granted directly to businesses, organizations, or individuals by the federal government (government). Aiming to increase output, enhance exports, support research and development, prevent a firm from failing, and minimize unemployment, subsidies are provided. Moreover, its introduction is intended to make the cost of a product more reasonable for customers. A subsidy is a form of financial aid provided to manufacturers of a product in order to help them compete more successfully in the marketplace.

  • The most basic type of subsidy is a monetary gift or grant in the form of money.
  • Grants may also enable a corporation to defray all or a portion of its general and administrative expenses.
  • Under the umbrella phrase of ‘financial aid,’ the word’subsidy’ is used to refer to financial help.
  • a quantity of money awarded by the state or a public entity to assist an industry or business in maintaining the price of a commodity or service at or below the market rate.” (2) A sum of money given to assist an endeavor that is seen as being of public benefit.

Consumption subsidy

Consumption subsidies are intended to encourage consumers to behave in a more favorable manner. The majority of consumer subsidies may be found in underdeveloped countries. To be specific, where the government lowers the cost of essential goods, utilities, and educational opportunities. For example, the Mexican government has subsidized maize tortillas for the past 25 years. Tortillas are to Mexicans what rice is to the Chinese, potatoes are to the British, and baguettes are to the Parisians.

The subsidies were terminated in 1999.

Farmers in Country B will be unable to compete if the government of Country A subsidizes the export of bananas to their country.

Export subsidy

Export subsidies are financial assistance provided by the government to companies who sell their products overseas, or export their products. Subsidies should, in theory, have a positive impact on the country’s balance of payments. Many economists believe that subsidies are beneficial to consumers because they allow them to pay less than the market price. However, they have a negative impact on the countries that provide the subsidies.

Subsidies in China

With the support of China’s large export subsidies, the country has been able to gain a competitive edge in industries where they previously had no comparative advantage. The car components, paper, glass, steel, and solar sectors, to name a few, have reaped the benefits in large quantities. Export subsidies from China, say industrialists in North America and Europe, make it almost difficult for them to compete in their own markets. Recently, investigative journalists discovered that China’s export subsidy misuse is causing significant economic harm to the country.

Employment subsidy

Employment subsidies, sometimes known as pay subsidies, are used to entice firms to provide additional work opportunities. As a result, the number of unemployed people decreases. The taxpayer contributes to the cost of living by providing salary support. In Australia, for example, salary subsidies are made available to firms who hire job searchers who meet certain qualifications. Individuals who have been jobless for a lengthy period of time, employees over the age of 50, and indigenous people are all eligible.

Employers may use wage subsidies to grow their businesses and hire additional employees, which will help to strengthen the economy and generate more employment, according to Australia’s Department of Employment.

Transport subsidies

Many governments across the globe provide subsidies for public transportation, notably train, aviation, bus, and subway (in the United Kingdom: subterranean) services. Their subsidies help to alleviate traffic congestion and pollution. They also contribute to the creation of greater wealth by expediting the arrival of individuals at their places of employment and business appointments. Simply put, investment in transportation infrastructure helps to increase the overall productivity of an economy.

It is estimated that the European Commission makes €36 billion from fares, which is nearly as much as they make from the sale of goods.

In 2015, China invested more than $128 billion in the building of its domestic railway system.

The European Union condemns Germany for having a large number of subsidized (loss-making) airports, many of which are used by low-cost carriers.

Long-distance bus services in Germany are exempt from tolls, according to the country’s railway operators. In contrast, German railway businesses are required to pay track access charges.

Agricultural subsidy

In order to augment farmers’ incomes while also influencing the price and supply of agricultural goods, several governments provide subsidies to farmers. Lamb, sheep, pork, beef, tobacco, peanuts, rice, milk, cotton, and cereals are examples of agricultural goods that have received government subsidies. Despite the fact that farmers believe these financial incentives are excellent, many others do not. Farmers in developing nations suffer as a result of agricultural subsidies provided by countries such as the United States, Canada, the European Union, and Japan.

According to some economists, many of them travel to the industrialized countries in order to find job.


  • The state or a public entity grants a quantity of money to an industry or business in order to assist them in keeping the price of a product or service low.
  • It is clear that encouraging commodity production with price subsidies has not kept people in rural areas.’
  • ‘If a government has an export subsidy program, requests for subsidies from different industries will exceed t’
  • The World Bank cautions that if industrialized countries do not embrace changes in policies to offer big subsidies to their farmers, there would be little progress on other concerns. monopoly rents, hidden subsidies, arbitrarily set floors and ceilings on input prices are examples of distortions.
  • Labor unions in the United States are frequently the ones that advocate for tariffs and subsidies to safeguard unionized businesses. Individual governments have also provided assistance to a range of different industries through nationalization, subsidies, and special incentives.
  1. 1.1A sum of money given to assist an endeavor that is considered to be in the public’s best interests. ‘She was apprehensive about her Arts Council stipend,’ says the author.
  • In a period of cuts in the post-war Welfare State, withdrawal of state subsidies and support, and low public expenditure, the arts were able to flourish.’
  • ‘The fact is that private and corporate money has surpassed public subsidy in festival funding.’
  • ‘Some projects rely on public subsidies to fund even their core activities.’
  • ‘The centre also manages support programmes for people with disabilities as well as providing direct financial assistance.’ To support ticket subsidies for school children and senior citizens to attend area performances and exhibitions
  • ‘For everything else, they are reducing the public subsidy.’
  • ‘In attempting to make their public subsidy of culture more responsive to modern cultural tastes, the current government is accused of ‘plebeianism. “
  • ‘By the conclusion of the franchise, which will include more than 2,000 services, the total amount of public subsidies will be £2.43 billion.’
  • It is recommended that you utilize public transportation and advocate for public subsidies for it. For example, “Railtrack has been obliged to honor its obligations to railroad customers — kind of — but only after the government threatened to purchase an equity share in exchange for public subsidies.” As a result of public subsidies, Scotland is currently experiencing a ‘wind rush,’ with developers ready to build a network of up to 70 wind farms across the nation.
  • Funds, assets, money, capital, resources, cash, wealth, reserves, wherewithal, revenue, income, and stock are all terms that can be used to describe financial resources. View the list of synonyms 1.2A financial gift or contribution of funds. ‘the employment is well compensated, and benefits include a mortgage subsidy,’ says the author.
  • As a result of the cessation of Soviet subsidies, ‘the country’s economy is on the verge of collapse.’ Other proposals include providing subsidies to strengthen security and equipping post offices with computers so that consumers may use the internet. Mortgage subsidies are also available to members through the Defense Home Owners Scheme.’
  • ‘Immigrants were able to purchase 25-acre parcels at relatively low interest rates, with a variety of subsidies also available.’ It is not through words but through acts that we will overcome this gap
  • Not through subsidies but through investment
  • Not through rhetoric, but through technology. The Veterans Administration also provided mortgage discounts, which enabled veterans to purchase homes with reasonable ease.
  1. Grant, allowance, endowment, contribution, donation, bursary, gift, present, investment, bestowal, benefaction, allocation, allotment, and handout are all terms that can be used to describe monetary compensation. View the list of synonyms
  • 2historical A parliamentary donation to the sovereign for the purpose of meeting state requirements. ‘In exchange for supplying subsidies, Parliament asked that the monarchy grant it ever-greater powers.’
  • In addition, the war’s financial burden was unprecedented in English history: even with parliamentary subsidies, it could only be paid by borrowing and the sale of Crown properties. Thus, even though the debts of the Irish government represented a drop in the ocean of English public finance, they were required to be covered by Irish legislative subsidies.
  1. An occasion-specific tax paid in response to a certain event If we take indirect tax subsidies into consideration, we are already halfway to a fully socialized medicine system.
  • It was argued that this strategy was overly bureaucratic and that an alternative model, in which individuals would be given tax credits and other incentives to purchase their own insurance, would be preferable.
  • ‘First and foremost, he believed that, given the high rents in many communities, the lower-middle class deserved some tax breaks.’
  • ‘Many expatriate pensioners are unaware that housing and council tax subsidies, as well as disability benefits, are not payable outside the United Kingdom.’
  • ‘The EU is also set to levy up to $4 billion in tariff increases on US products in a dispute over tax subsidies to foreign sales of US corporations.’
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Anglo-Norman influence on late Middle English French subsidie is derived from the Latin subsidium, which means ‘help.’


When a government grants a subsidy, it is either a direct payment or an indirect payment in the form of an economic concession or privilege to private businesses, families, or other government-sponsored entities in order to achieve a public aim. The identification of a subsidy is sometimes difficult due to the wide range of subsidy instruments available, the diversity of the aims they are intended to serve, and the complexity of their impact on the economy. Various government-sponsored programs in the areas of transportation, housing, agriculture, mining, and other sectors have been established on the basis that the maintenance or extension of these businesses, even at the expense of the general population, is in the public’s interest.

  • Grants of money or other assistance granted by a central government to a local authority in order to achieve objectives in which the central government has an interest are also included in this definition (e.g.,grants-in-aid).
  • It doesn’t matter what shape subsidies take; their goal is always the same: to shift the outcomes of otherwise free markets and unhindered competition in a direction that is more compatible with the aims of public policy.
  • Subsidies have been around for a long time in all countries.
  • Many people have expressed doubt about protectionist theories in the past.
  • A comprehensive economic planning system takes the role of the subsidy device in countries where the central government exerts significant control over the pricing and production practices of domestic companies.
  • Aside from that, there are a variety of government measures that have subsidy effects, such as regulatory statutes that soften the full force of competition, rules that compel the purchase of goods fromfavored manufacturers or countries, and protective wage and price legislation.
  • Direct subsidies have historically been the most extensively employed method of promoting the development of the transportation sector in general.

Indirect subsidies are created when governments purchase directly from private producers at prices that are higher than the market price, maintain higher prices through market manipulation, provide services to private enterprises at prices that are lower than the cost of providing the service, or grant special tax concessions to businesses.

Furthermore, they may serve to support the survival of inefficient producers.

It is necessary to weigh the advantages of a subsidy (which are typically diffuse and difficult to quantify) against the costs of the subsidy, which include increased prices, higher taxes, and inefficiency to determine whether or not the subsidy is desirable.

Subsidies Definition (6 Examples and 2 Types) – BoyceWire

Written by Paul Boyce and last updated on October 31, 2020 Generally speaking, subsidies are a method through which governments provide money to private companies in order to keep prices low or to safeguard the business and its employees. This might be accomplished by a monetary contribution or through a specific tax reduction. Subsidies are classified into two categories: direct subsidies and indirect subsidies. Direct payments, for example, are made when the government distributes money directly to a company’s account.

Direct subsidies such as government-backed loans or ‘payments in kind’ might be considered to be a sort of indirect subsidy.

  1. Paid by the government to safeguard jobs and/or keep the prices of final goods low, subsidies are a type of aid. Subsidies are classified into two categories: indirect and direct. When it comes to subsidies, critics point out that they are an inefficient use of resources and that they might lead to perverse incentives — as in the case of dairy production in the United States.

The term “direct subsidy” refers to a situation in which the government makes a payment to a party without any goods or services being exchanged. Payment is made as a result, but no compensation is received by the government. Direct subsidies can involve payments to commercial firms as well as payments to low-income individuals and families. As a result, housing assistance or food vouchers for low-income households, as well as payments to private companies in the form of “cash in the bank,” might be included.

Consider the fact that government-backed loans may be thought of as a sort of subsidy.

In a nutshell, direct subsidies are payments made to third parties in the form of cash.

Generally speaking, subsidies are payments made by the government to private organizations in order to keep them in business and safeguard employment.

Agriculture is one of the most heavily subsidized industries in the world, accounting for around a quarter of all subsidies.

The funds involved are significant, with the United States subsidizing the sector to the tune of $20 billion per year on average.

Historically, we may trace the need for such safeguards back to the devastating World Wars that happened in the last century.

Governments are providing financial incentives for environment-friendly alternatives such as electric vehicles in response to the prevalence of climate change.

The goal is to lessen reliance on gasoline and diesel and transition toward a more environmentally friendly option.

A survey by the International Monetary Fund indicated that the largest subsidies were supplied by China ($1.4 trillion), the United States ($649 billion), Russia ($551 billion), and the European Union ($289 billion).

In fact, despite the trend toward green energy, there are millions of employment that are still reliant on the usage of fossil fuels.

As a result, the majority of governments in the industrialized countries offer some form of assistance to the business.

Steel is yet another example of a sector that is reliant on government subsidies — mostly in order to defend and sustain national security and defense capabilities.

However, it is also an important component for numerous businesses, including manufacturing.

The majority of wealthy countries provide subsidies to railway and bus companies.

In addition, subsidies for the purchase of new automobiles have been offered on an irregular basis.

Because it is directed directly to customers, it is a slightly different form of subsidy.

Welfare payments may not appear to be a subsidy at first glance, yet they are classified as such since money is being distributed without any transaction taking place.

For every positive effect that a subsidy has, there is an equal and opposite negative consequence that occurs.

Subsidies such as housing assistance or unemployment compensation can help the poor get out of poverty.

Student loans backed by the government, for example, might result in a more educated workforce.

Such subsidies may be costly to the government in the near term, but they have the potential to pay for themselves in the long run through increased economic development and tax income.

The result of this growth in production is an excess of supply, which has caused suppliers to lower their prices, which in turn has the potential to stimulate demand.

To provide an example, governments often regard steel manufacturing to be a requirement for national defense, and as a result, they attempt to safeguard it against lower-priced foreign competitors.

By subsidizing a certain industry, the government may drive demand in that direction.

Because it is less expensive for the user to use than a vehicle or motorcycle, they are more inclined to do so.

Supporting the industrial sector and, consequently, the employment that are linked with it can assist to prevent its demise.

These subsidies are frequently necessary in the long run since the sector may be subjected to cost and price pressures from more efficient foreign competition.

Even if greater taxes are required, is the end outcome and benefit worth the additional expense and effort?

It is asserted that social assistance such as housing and unemployment might lead to a state of reliance in some people.

This might be interpreted as a failure of the government.

When a government provides a subsidy, it diminishes the incentives to reduce costs and increase efficiency.

Agriculture subsidies, for example, might produce unintended consequences.

Because of this, they may produce whatever much dairy they want, and the government will purchase any extra.

One of the most underappreciated consequences of subsidies is the increase in taxation.

This may be in the near term, or it could be in the long term if it is financed by debt.

This is due to the fact that those who profit from it are deliberately encouraged to lobby government officials in order to keep it in place.

Some have major negative effects, while others have some beneficial effects.

In economics, subsidies are provided by the government to correct market failures.

The government believes that there is a shortage of demand in certain areas, such as college and university education.

College graduates have a better depth of knowledge and, as a result, are more valuable to businesses.

Student loans are extremely hazardous, so students would either have to pay exorbitant interest rates or would be denied access to education altogether.

Therefore, governments give financial guarantees to stimulate private investment and the enrollment of students in postsecondary education.

Despite the fact that government subsidies may be beneficial in certain cases, they frequently have unforeseen consequences.

In turn, property developers are disincentivised from developing rental units as a result of this.

What are the many sorts of subsidies available?

There is no exchange of goods or services in the case of a direct subsidy, in which the government makes a payment directly to the person receiving the payment.

Is it possible to give examples of government subsidies?

Transportation 2. Renewable Energy Agriculture and fossil fuels are the third and fourth items on the list. Welfare Payments (No. 5) 6. Automobiles that run on electricity What exactly is a subsidy? To put it simply, a subsidy is money that the government gives to private businesses.

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