VIGNESHWARAN.

R 09MBA55

Meaning of incentives and subsidies

Incentive is a general one and includes concessions, subsidies and bounties.

Subsidy denotes a single lump of sum which is

given by a government to an industry.

Bounty denotes bonus or financial aid which is

given by a government to an industry to help it

compete with other units.

ADVANTAGES

They act as a motivational force which makes the prospective entrepreneurs to enter into manufacturing line.

They encourage entrepreneurs to start industries in backward areas.

Cont

By providing subsidies and incentives the government can,

Bring industrial development uniformly in all

regions.
Develop new entrepreneurs. Increase the ability of entrepreneurs to face

competition successfully.

NEED FOR INCENTIVES

To remove regional disparities in development. To promote entrepreneurship and strengthen the entrepreneurial base in the economy. To provide competitive strength, survival and growth. To generate more employment and remove under-employment and unemployment.

PROBLEMS OF INCENTIVES

Empirical studies reveal that the incentive schemes are being highly misused. Some of the units are located in backward areas with a view to mainly avail the

subsidies and concessions. The real objective of

providing incentives is hardly achieved.

Cont

Favoritism and corruption have crept into the administrative machinery which has caused much financial strain on the

exchequer.

Procedure for claiming

The

state

government have

union

territory disbursing

administrations subsidy.

nominated

agencies to administer the scheme of investment

State financial corporation and financial institutions such as IDBI, IFCI and ICICI are some of the agencies selected for disbursement of subsidy.

Cont

Each industrial unit being set up in specified district/ area gets registered with the Director of industries for claiming investment subsidy.

The units desirous of getting investment subsidy may approach the agencies who in turn make

recommendation after verification etc., to the state level

committee which has been appointed in each state

union/ territory.

Schemes in operation
Export/

import subsidies and bounties. Interest free loans. Subsidy for R&D works. Capital investment subsidy. Transport subsidy. Interest subsidy. Subsidy for power generation. Exemption from property tax.

Thank you