Which of the following statements about subsidies is NOT correct?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Subsidies on exports are implicit subsidies.
An implicit subsidy is given by charging a low price for a public service. An explicit subsidy is paid openly on an item, such as exports or food.
Option (1) Under-pricing of public services like education and health is an implicit subsidy. — True. Charging less than cost is an implicit subsidy.
Option (2) Subsidies on food and fertilisers are explicit subsidies. — True. They are paid openly on these items.
Option (3) Subsidies on exports are implicit subsidies. — False. Export subsidies are explicit.
Option (4) Subsidies are an important policy instrument which aim at increasing welfare. — True. Their aim is welfare.
NCERT (2026-27): “Revenue Expenditure … Subsidies are an important policy instrument which aim at increasing welfare. Apart from providing implicit subsidies through under-pricing of public goods and services like education and health, the government also extends subsidies explicitly on items such as exports, interest on loans, food and fertilisers. …” |