BharatNotes Subsidy
noun (plural: subsidies)Usage in a UPSC answer
While agricultural subsidies have undeniably cushioned smallholder farmers against price volatility, their open-ended expansion has strained fiscal space and distorted cropping patterns, making rationalisation through direct benefit transfer a pressing imperative of welfare reform.
Synonyms
Antonyms
Word Family
subsidize (v), subsidized (adj), subsidizing (v pres.p), subsidization (n), subsidies (n pl)
Root
Latin subsidium = aid, reserve troops; sub- = under, behind + sedēre = to sit; -y = noun suffix
Etymology
From Latin subsidium ("help, aid, reserve troops"), from sub- ("under, behind") + sedēre ("to sit") — originally referring to reserve troops stationed behind the front lines as backup support.
Memory Hook
Think "SUB- (under) + SIT": a subsidy is money that sits underneath an industry, propping it up so it does not collapse — financial support that "sits under" the recipient.
How This Word Works in UPSC Writing
A transfer that lowers the price paid below the cost of supply. For GS3 the useful cut is between explicit subsidies, which appear in the budget as food, fertiliser and petroleum outgo, and implicit subsidies such as below-cost power, irrigation water and underpriced public services, which never appear as a line item yet carry a real fiscal cost. Three consequences follow. Subsidies are revenue expenditure, so they widen the revenue deficit without creating an asset. Input subsidies on power, fertiliser and water distort cropping towards water-intensive crops and deplete groundwater. And they are hard to withdraw, which is why reform has moved towards direct benefit transfer to cut leakage and improve targeting rather than towards outright removal.
Don’t Confuse It With
A subsidy lowers the price of a good or service. A direct benefit transfer pays cash to the beneficiary instead, so the price signal is left undistorted. A merit good is the justification offered for subsidising consumption that individuals would otherwise under-consume. Under the WTO Agreement on Agriculture, support is sorted into an amber box of trade-distorting subsidies that are capped, a green box of minimally distorting support that is exempt, and a blue box of amber-type support tied to production-limiting conditions. India's public stockholding for food security is contested as amber box, and an interim peace clause agreed at the Bali Ministerial (Dec-2013) shields it from dispute-settlement challenge pending a permanent solution.
Hindi Meaning
सब्सिडी or आर्थिक सहायता (ārthik sahāyatā); राजसहायता in formal usage.
Common Questions
- What is the difference between an explicit and an implicit subsidy?
- An explicit subsidy is budgeted and visible, such as food or fertiliser subsidy, while an implicit subsidy such as below-cost power or irrigation water carries a real cost that never appears as a budget line item.
- Why are subsidies said to worsen the fiscal position?
- Because they are revenue expenditure, adding to the revenue deficit without creating any capital asset in return.
Seen in UPSC Question Papers
- Prelims 2011 — External Sector
- Mains 2015 · GS3 · 12.5 marks — Economy
- Mains 2014 · GS2 · 12.5 marks — Governance
- Mains 2013 · GS3 · 10 marks — Agriculture
Real UPSC previous-year questions whose text uses “Subsidy” — proof this word earns its place on your list.
Tip: press Alt+S to hear pronunciation
