Economic Survey 2015-16 finds uneven distribution of ₹ 100,000 crore subsidies going to the better-off merely on account of 6 commodities like gold, LPG, Kerosene, Electricity, railway fares, aviation and turbine fuel (ATF) plus the Small Savings Scheme. The total amount given as subsidy is no less than ₹ 91,350 crore not to forget that this is an underestimate of the actual subsidy to the better-off because of the underestimation of the consumption by the rich in the NSS. If we add the subsidies inherent in just the PPF schemes, the total subsidy to the well-off amounts to above ₹ 1 lakh crore. This represents substantial leakage from the Government’s kitty, and an opportunity foregone to help the truly deserving.

Addressing the interventions and rectifying these anomalies may be good not only from a fiscal and welfare perspective, but also from a political economy welfare perspective, lending credibility to other market-oriented reforms.

Subsidy distribution distortions lead to fiscal leakage; reform recommended to improve targeting and fiscal efficiency. Economic Survey 2015-16 finds substantial public transfers flowing disproportionately to better-off households through a narrow set of instruments (gold, LPG, kerosene, electricity, railway fares, aviation turbine fuel and small savings schemes), notes measurement underestimation that increases the apparent leakage when including public provident and similar schemes, and recommends targeted interventions to rectify anomalies to improve fiscal efficiency, welfare targeting and the credibility of market-oriented reforms.