Containing subsidies: Why states must reassess and rationalise expenditure

Doing so, especially given their constrained fiscal space, would help states ensure the subsidies are better aligned with their intended objectives and public funds are used more efficiently

Subsidies in India are frequently used as a tool for welfare and social support. Their utilisation, necessity, and long-term viability have been the subject of considerable debate over the years. However, in the context of the country’s higher general government debt and constrained fiscal space, rationalisation of subsidies has become crucial. In this regard, a recent study conducted by the National Institute of Public Finance and Policy, titled “Rationalisation of Explicit Subsidies at State Level”, highlighted the critical importance of state governments in managing their expenditures more effectively. The study emphasised two significant trends in state finances