Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Is direct cash better than subsidy?
Tue, 5 Jul Pre-Open

Subsidies in India have a long history and a wide coverage from fuel to food to fertilizers. They were introduced with a noble motive to provide the poor access to basic necessities to improve their standard of living. However, the omnipresent greed and corruption in the country has not left subsidies untouched. The indiscriminate subsidy system has led to wastage, leakage, adulteration, inefficiencies and black markets. For example, as per the World Bank, more than 50% of the subsidized food gets leaked away and does not reach the target households. Similar is the case with diesel. More and more passenger cars and SUVs are getting converted from petrol to diesel. The subsidy on diesel is helping not the poor but middle and upper class.

To take a corrective step in this direction, the Government in the current year's Union budget had proposed to replace the existing system of grant of subsidies through Public Distribution System (PDS) by direct cash transfer in a phased way to the 'right' beneficiaries. The idea finds strong support from eminent people as it reduces the red tapism, middlemen and bureaucratic levels and will ensure that the scheme works for target population. However, for such a radical switch, we need technology and some sort of identification for the masses. Hence, a task force was set up in the month of Ferbruary 2011 under Mr. Nandan Nilekani, Chairman of Unique Identification Authority of India (UIDAI), to come up with a way to handle the project.

The report regarding the same is about to be revealed. While it all looks goods in theory, is India ready for such a shift? First of all, the success of UID, which is the backbone of the new policy, is yet to be tested. It will be the basis to identify the beneficiary and grant him the cash. And then there are challenges like making sure that these benefits reach the target households. The UID system does not help here. It is an exercise to be done by other agencies and hence prone to judgmental error. Another concern is on the logistics part. The system is supposed to work so that cash is directly deposited in the beneficiaries' account. Most of the beneficiaries of such a scheme will reside in rural areas where the penetration of financial services is limited. Hence, there will be a need to use banking correspondents or agents to disburse funds and authenticate beneficiaries. However, once the funds get credited, the beneficiary can buy the item at market prices which will obviate the existence of fair price/ration shops.

To conclude, the direct cash transfers may not be perfect solution. However, once the teething troubles and logistics are taken care of, it should rank higher than PDS that is fuelling black markets and hardly helping the poor.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Is direct cash better than subsidy?". Click here!

  

Stock Market Updates

TATA ELXSI Share Price Up by 6%; BSE IT Index Down 0.7% (Today's Market)

Oct 22, 2020 03:34 PM

TATA ELXSI share price is trading up by 6% and its current market price is Rs 1,633. The BSE IT is down by 0.7%. The top gainers in the BSE IT Index are TATA ELXSI (up 5.8%) and SONATA SOFTWARE (up 6.0%). The top losers are TCS (down 0.1%) and HCL TECHNOLOGIES (down 0.3%).

JK TYRE & IND Share Price Up by 10%; BSE 500 Index Up 0.0% (Today's Market)

Oct 22, 2020 03:34 PM

JK TYRE & IND share price is trading up by 10% and its current market price is Rs 67. The BSE 500 is up by 0.0%. The top gainers in the BSE 500 Index are JK TYRE & IND (up 10.4%) and CHENNAI PETROLEUM (up 20.0%). The top losers are HDFC and PROCTER & GAMBLE HEALTH (down 0.1%).

SHEELA FOAM Share Price Up by 6%; BSE FMCG Index Up 0.3% (Today's Market)

Oct 22, 2020 03:34 PM

SHEELA FOAM share price is trading up by 6% and its current market price is Rs 1,331. The BSE FMCG is up by 0.3%. The top gainers in the BSE FMCG Index are SHEELA FOAM (up 5.6%) and GSK CONSUMER (up 5.1%). The top losers are BALRAMPUR CHINI (down 0.8%) and NESTLE (down 0.9%).

THYROCARE TECHNOLOGIES Share Price Down by 5%; BSE HEALTHCARE Index Down 0.3% (Today's Market)

Oct 22, 2020 03:34 PM

THYROCARE TECHNOLOGIES share price is trading down by 5% and its current market price is Rs 1,109. The BSE HEALTHCARE is down by 0.3%. The top gainers in the BSE HEALTHCARE Index are JUBILANT LIFE SCIENCES (up 5.0%) and IPCA LABS (up 4.5%). The top losers is THYROCARE TECHNOLOGIES (down 5.2%).

TORRENT POWER Share Price Up by 6%; BSE POWER Index Up 2.2% (Today's Market)

Oct 22, 2020 03:30 PM

TORRENT POWER share price is trading up by 6% and its current market price is Rs 326. The BSE POWER is up by 2.2%. The top gainers in the BSE POWER Index are TORRENT POWER (up 6.1%) and KEC INTERNATIONAL (up 6.3%). The top losers are ADANI POWER (down 0.4%) and SIEMENS (down 0.9%).

Sensex Trades 138 Points Lower; Dow Futures Down by 124 Points (Today's Market)

Oct 22, 2020 12:30 pm

BSE Sensex is trading down by 138 points, while the NSE Nifty is trading down by 42 points.

View More Indian Share Market News

Most Popular

My Latest Stock Recommendation(Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

The 'Seedhi Baat, No Bakwaas' View on ITC(Profit Hunter)

Oct 12, 2020

Is ITC an investment or a speculation at current levels?

One of the Best Investment Opportunities in the Market Right Now(Fast Profits Daily)

Oct 16, 2020

The one sector that you should be looking at to make good profits.

The Inflection Point for Defence Stocks is Getting Closer(Profit Hunter)

Oct 9, 2020

Few Indian defence companies could use their engineering capabilities to eventually become global leaders.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Oct 22, 2020 03:36 PM

MARKET STATS