Subsidi

Subsidi, commonly called subsidy in English, is a government financial contribution intended to lower the price or cost of goods and services, support producers, or raise the income of particular groups. Subsidies can take various forms, including direct cash transfers, price supports, tax exemptions or credits, and in-kind transfers such as vouchers or goods.

Subsidies are implemented in different ways and can be direct, indirect, or implicit. Direct subsidies pay money to firms or households. Price subsidies lower consumer prices through government purchases or price controls. Input subsidies reduce the cost of essential inputs like energy, fertilizer, or credit. Tax subsidies include deductions, exemptions, or credits. They may be universal or targeted, temporary or long-lasting, and conditioned on social or environmental objectives.

Rationale and effects: Subsidies aim to address market failures, protect vulnerable groups, support strategic industries, or stabilize prices. They can improve access to essential goods and secure incomes for producers. But they also pose fiscal risks, can distort market incentives, lead to inefficient production, and invite rent-seeking or environmental harm if poorly designed.

Evaluation and policy design: Analysts measure subsidy costs, distributional impact, and distortions to prices and competition. Reform options include phasing out poorly targeted subsidies, replacing price subsidies with direct cash transfers, or gradually reducing reliance on subsidies while preserving essential social protections. Examples include agricultural subsidies, fossil-fuel subsidies, and housing or education subsidies in different countries.