written by | April 15, 2022

Subsidy: Meaning, Types, Categories, and Business Schemes

The central government supports financially through discounts or monetary grants to public agencies or private organisations. Subsidies enable customers to purchase cheaper items and commodities. Transferring funds to public/private entities incentivises them to offer their goods at a discount. Market's additional benefits to society are often promoted by policymakers to increase the supply of that item or service. The goal is to make the goods produced accessible to the general public. Subsidised items contribute to the welfare of the community.

Did you know?

Government subsidy schemes are grouped together as Central Sector Interest Subsidy (CSIS) Schemes.


A subsidy is a benefit by the government to a person, company, or organisation. It may be either direct (as in the case of cash payments) or indirect (as in the case of credit card payments) (such as tax breaks). Typically, the subsidy alleviates some form of hardship, and it is in the public interest to encourage a social benefit or economic policy.

Different Types of Subsidies Provided by the Government in India

The different types of subsidies are 

  • Cash subsidies. 
  • Food subsidy.
  • Procurement subsidy.
  • Education subsidy.
  • Export/Import subsidy.
  • Housing subsidy.
  • Regulatory subsidy.
  • Oil & fuel subsidy.
  • Tax subsidy.
  • Transport subsidy.

Also Read: Top 5 Government Loan Schemes for Small Business in India

What Are the Five Types of Government Subsidies?

  1. Export subsidies. 
  2. Agriculture subsidies. 
  3. Oil subsidies. 
  4. Housing subsidies.
  5. Healthcare subsidies

What Is the Different Category of Subsidies in India?

Subsidies are of two groups depending on their social and economic impact:

Economic Subsidies

Social subsidies

Agriculture and cooperation


Irrigation and flood control


Power and energy 

Water supply


Rural housing and others


Women empowerment



How Is Subsidy Implemented?

A subsidy is a quantity of money made available to assist an endeavour deemed in the public interest. The following are the different methods of implementing a subsidy:

  • Producers' subsidies
  • The grant provided to consumers
  • Subsidy to input producers
  • Offering incentive programs
  • Production/sales through state-owned firms
  • Cross-subvention

What Are the Different Subsidy Schemes Launched by the Government?

The government or another public entity awards the money in the form of a subsidy to assist the industry. The following is a list of 15 government subsidies for businesses in India.

  1. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)

Only Micro and Small Enterprises are eligible as defined in the MSMED Act. CGTMSE scheme includes the manufacturing and service industries. You may get loans of up to ₹1 crore via this business subsidy plan.

  1. Subsidy From the Government for Organic Farming

Individuals, groups of farmers/growers, proprietary and partnership enterprises, cooperatives, fertiliser industries, companies, corporations, and non-governmental organisations may apply for the government subsidy. They used to operate a bio-fertiliser or biopesticide production operation. In addition, the subsidy is available to APMCS, municipalities, non-governmental organisations, and private companies.

  1. Textile Industry Technology Upgradation Fund Scheme (TUFS)

The Ministry of Textiles developed this business subsidy scheme to assist textile businesses in India. The plan provides a one-time capital subsidy of 15% for qualified benchmarked gear. Subsidies are available for the garments and technical textiles categories up to ₹30 crores.

  1. Food Processing Industry Technology Upgrade/Establishment Scheme

This government program supports the establishment, expansion, and modernisation of food processing industries across all segments, including fruits and vegetables, dairy products, fishery, oilseeds, meat, poultry, and other agri-horticultural sectors. The support is from a grant of up to twenty-five per cent of the equipment cost. 

  1. Development of the leather sector - Leather Industry Development Plan

The government initiative is accessible to all current footwear made of leather, and other accessory businesses, including tanneries, saddleries, products made of leather, footwear components businesses, and footwear without leather.

  1. Subsidy for Upgrading Technology using Credit-Linked Capital (CLCSS)

For small-scale businesses, the Ministry of Small Scale Industries (SSI) conducts a small-scale technology improvement programme. By granting an upfront capital subsidy of fifteen (limited at ₹50 lakhs) for loans to update their equipment and machinery.

  1. Market Development Assistance Program

The MSME India project offers finance for manufacturing small and micro enterprises to participate in international trade fairs/exhibitions under the MSME India stand. Small and micro exporters will benefit from this finance scheme, which seeks to help them enter and develop new markets worldwide.

  1. Technology and Quality Upgradation Support for MSMEs

To encourage the MSME sector in India to adopt quality standards, the government provides this credit subsidy. ISO certifications such as ISO 9000, ISO 14001, and HACCP are the primary motivations for this effort.

  1. Proposal for a Miniature Training and Tool Room Facility

The government wants to help small and medium-sized enterprises (SMEs) by providing technical support and training in tool manufacture and design.

  1. Subsidy for NSIC Small Business Loans

NSIC provides two financial aid packages. Aid in obtaining raw resources and promoting products. The Raw Material Assistance Program aims to provide financial support for the raw material acquisitions of small businesses and industries. As a result, SSI can focus its efforts on creating high-quality products.

  1. Loan Subsidy for Cold Chain Businesses from the Government

An integrated cold chain and preservation infrastructure may be set up by anybody interested in cold chain solutions: individuals, groups of entrepreneurs, co-operative societies, self-help groups, farmer producer associations, non-governmental organisations, and state public sector companies.

Also Read: How Can a PMKVY Loan Help You Start an Amazing Business Venture?

  1. For Coconut Producing Units Under the Technology Mission on Coconut (TMOC)

In the case of Coconut Plantations, anyone may apply for assistance starting a coconut-based business that isn't dependent on the husk under the Technology Mission on Coconut (TMOC). The board charges a fee for transferring technology for various products.


"Scheme for Agro-Marine Produce Processing and Development of Agro-clusters" is the abbreviation for SAMPADA. The SAMPADA plan, which has a budget of ₹6,000 crores, aims to merge current and new food manufacturing efforts. Primary objectives include reducing food waste and increasing farmers' income.

  1. Small Business Loans from the Government - Dairy Farming

The NABARD subsidy for dairy production contributes to the expansion of the Indian dairy industry. Adding organic matter to the soil is a great way to increase crop yields and improve soil fertility.

  1. Loan Subsidy for Small Businesses in the Horticulture Industry

The National Horticulture Board (NHB) was set up by the Indian government back in 1984. Societies Registration Act 1860 registered it as a self-governing organisation. The growth of high-tech commercial horticulture is one of the goals of the National Horticulture Board. Post-harvest infrastructure development and new horticulture product marketing are also included in this service.

What Are the Benefits of Subsidies?

The government initiates subsidy programs for various goals; the various benefits of subsidies include:

  • Reducing the costs of necessary items while also providing them at a low price to a significant population segment.
  • Due to various issues, subsidies to industries intend to halt the industrial sector's decline. Therefore, it is an indirect means of assisting the country's employment and industrial sectors.
  • Besides delivering trained labour to industry, subsidised education provides long-term advantages for the nation and society.
  • Subsidies contribute to the country's battle against unemployment and poverty eradication.


A subsidy is a form of incentive provided by the government to people or businesses to increase their competitiveness or enable them to live more dignified lives. Government offers subsidies in the form of grants, cash, tax credits, and other forms of assistance, and it provides significant advantages to society.
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Q: What are the new PMAY subsidy slabs?


The two new subsidy slabs would cover individuals earning up to  ₹12 lakhs and ₹18 lakhs p er year.

Q: How do subsidies work?


Subsidies give an incentive for those who create or purchase a product to continue producing or purchasing it.

Q: How is the subsidy money transmitted to the beneficiary's bank account?


Government deposits the subsidy straight into the bank account of the scheme's recipient.

Q: What are the various subsidies available in India?


In India, the most significant subsidies are those for food, interest, fuel, and fertiliser.

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