Solution:

What is Incentives and subsidies?

• The term “incentive” includes concessions and bounties. ‘Subsidy’ denotes a single lump sum which is given by a government to industry. It is granted to an industry which is considered essential in the national interest.

• The term ‘bounty’ denotes bonus or financial benefit which is given by a government to an industry to help it compete with other units in a nation or in a foreign market.

• It is given in proportion to the output. Bounty confers benefits on a particular industry, while a subsidy is given in the interest of the nation.

These subsidies and incentives offer the following advantages :

• (a) They act as a motivational force which attract the prospective entrepreneurs to enter into manufacturing line.

• (b) They encourage the entrepreneurs to start industries in backward areas.

• (c) By providing subsidies and incentives the Government can :

• (i) bring industrial development uniformly in all regions.

• (ii) develop more new entrepreneurs which lead to entrepreneurial development.

• (iii) increase the ability of entrepreneurs to face competition successfully.

• (iv) reduce the overall problems of small scale entrepreneurs.

The schemes of incentives in operation in India:

Various incentive schemes offered by Central and State Governments including Union Territories to the entrepreneurs in India are as follows :

• Incentives Under The Licensing Regulations:

  • When the controls dominate, a relaxation of the control itself is a significant incentive.

  • A government notification states that the Central Government is of the opinion that directions for a further positive production orientations are to be given to the economy to increase production by removing all constraints to the maximum extent possible.

  • Now, therefore, in exercise of powers conferred by Section 29(B) (i) of the Industries (Development and Regulation) Act, 1951, the Central Government hereby exempts all undertakings registered under the said Act from the operation of Section 13(i) (d). “Such exemptions are quite many and resorted to frequently”.