- Impact on Inflation:
- Can contribute to food price inflation if they distort cropping patterns (e.g., MSP leading to supply-demand mismatch for non-MSP crops).
- Can keep prices of subsidized goods artificially low, but may lead to higher prices for other goods.
- Impact on Fiscal Deficit:
- Subsidies are costs incurred by the government through budgetary resources.
- Large price subsidies can significantly increase government expenditure.
- This contributes to a higher fiscal deficit.