Economics of Subsidy in India

The government has continued to subsidies petroleum with the intention of maintaining the purchasing power of the poor. In line with an increase in the demand for oil, the government's budgeted amounts for the petroleum subsidy has been rising significantly. Petroleum subsidy has increased by twenty-seven fold in the last six years. In this context, the objectives of the study are to examine the trend and pattern of subsidies in petroleum sector in India. The total petroleum subsidy including all the petroleum products are shown an increasing trend after 2005–06 to 2012. It had a declining trend from 1999–00 to 2005–06. It increases in that period after 2005–06, especially since 2008–09 is due to the galloping consumption of petroleum products. Subsidy as percentage of GDP fluctuates every year and petroleum subsidy was 0.46% where as food subsidy was 0.79% and fertilizer subsidy was 0.69% of GDP in 2012–13.