EDP Notes

The need for incentives and subsidies arises for the following reasons:
1) To Remove Regional Disparities in Development: Industries may be concentrated and
overcrowded in some regions, in order to correct this regional balance, incentives are provided to
entrepreneurs. They will start new ventures in such backward areas. Thus the backward areas
become developed and regional imbalances are corrected.
2) To Provide Competitive Strength, Survival and Growth: several other incentives are
provided for the survival and growth of industries. For example, reservation of products, price
preference etc. will improve the competitive strength. Other concessions like concessional finance,
tax relief etc., contribute their survival and growth.
3) To Generate More Employment and Remove Unemployment: Market adjustments
and external economies play a significant role in the economic development of a country. Subsidies
cause movement of entrepreneurs from developed areas to developing or backward areas. In short,
incentives and subsidies serve as a catalyst to start a dynamic process of development.
4) To Promote Entrepreneurship: Industrial estates, availability of power, concessional
finance, capital investment subsidy, transport subsidy etc, are few examples of subsidies which are
aimed at encouraging entrepreneurs to take up new ventures.