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A subsidy is a government-provided benefit to an individual, company, or organisation. It can be either direct (such as cash transfers) or indirect (such as loans or tax breaks). The subsidy is usually given to alleviate some burden.
It is frequently seen as being in the public’s best interests since it is given to support a social benefit or a tax policy. The Stand-Up India scheme’s features are attempts to encourage women and people of the scheduled caste and tribes categories to start businesses. The scheme is supported by the Ministry of Finance’s Department of Financial Services (DFS).
Subsidy on Business in India
The Indian government is recognised for having several loan programs from time to time to assure the country’s and economy’s development.
A subsidy is a government payment made directly or indirectly to individuals or businesses, generally in cash or targeted tax relief. According to economic theory, it can be used to counteract market failures and externalities to achieve improved economic efficiency. On the other hand, subsidies are criticised because of the difficulties in estimating effective subsidies, overcoming hidden costs, and avoiding political incentives from making subsidies more costly than advantageous.
Subsidies in India for Entrepreneurial Developments
The following are some of the subsidies schemes in India for entrepreneurial developments.
Credit Linked Capital Subsidy Scheme (CLCSS): The CLCSS offers SSI units a 15% capital subsidy on institutional finance which is used to introduce well-established and enhanced technology in several sub-sectors/products designated under the plan for loans up to Rs.1 crore.
Subsidy for the Establishment of a Cold Chain: This program aims to develop the establishment of an integrated cold chain and preservation infrastructure facility that runs from the farm gate to the customer.
Stand-Up India Scheme Features
The Stand-Up India scheme aims to provide at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch with bank loans ranging from Rs. 10 lakh to Rs. 1 crore for the establishment of a greenfield firm. The company might be in the manufacturing, service, or trading industries. In the event of non-individual businesses, at least 51 percent of the ownership and controlling interest should be owned by an SC/ST or a woman entrepreneur.
The key features of the Stand-Up India scheme are the eligibility conditions, the loan size, interest rate, security, margin money, and working capital.
- The Stand-Up India program is a hybrid loan that combines a term loan with a working capital credit.
- Amount of the loan: The program will cover up to 75% of the project’s cost.
- Interest Rate: The plan guarantees that the bank’s lowest applicable interest rate for that category is well within (base rate * MCLR + 3% + tenor premium).
- You can secure the loan with collateral or a guarantee from the Credit Guarantee Fund Scheme for Stand-Up India Loans in addition to the primary security (CGFSIL). On this, the lender has the last say.
- You can repay the loan over 7 years. A moratorium term of 18 months is also available under the plan.
- Disbursement Methods: The money would be approved as an overdraft for a loan of up to 10 lakh. The scheme will supply a RuPay debit card. If the loan amount exceeds Rs.10 lakh, the amount will be approved as a cash credit limit.
Amended Technology Upgradation Fund Scheme
The Amended Technology Upgradation Fund Scheme would give a one-time capital subsidy for investments in employment and technology-heavy parts of the textile value chain to promote exports and import substitution. The scheme is a credit-linked plan, which means that only projects for a technology upgrade that are funded by a specified limit of term loans sanctioned by lending agencies would be eligible for benefits under the scheme. It will not accept second-hand equipment. The scheme will run through March 31, 2022.
Through “Make in India” with “Zero impact and Zero defect” in manufacturing, these strategies increase the ease of doing business in the nation. They achieve the objective of producing jobs and encouraging exports. The Amended Technology Upgradation Fund Scheme enables the business sector to increase investment, productivity, quality, employment, exports, and import substitution. It also indirectly encourages investment in machinery manufacture (due to benchmarked technologies).
Conclusion
Unjustified subsidies have a macroeconomic cost in the form of persistently significant fiscal deficits and, as a result, higher interest rates. Moreover, excessively high levels of subsidisation which are reflected in correspondingly low user costs, cause substantial microeconomic inefficiencies. Visible excessive demand for subsidised services, pricing distortions, and resource misallocation are some of their most visible symptoms. In the case of some input-based subsidies, they can be seen. These issues are exacerbated because the subsidy system is riddled with leaks that provide neither equality nor efficiency.
