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Debit what comes in (as taxes), credit what goes out (as freebies)

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  Published in Media and Entertainment on Thursday, October 16th 2025 at 9:40 GMT by ThePrint
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Debit what comes in as taxes, credit what goes out as freebies
ThePrint, 2024

The article opens by juxtaposing the two sides of India’s public finance ledger. On the one hand, households and businesses pay taxes—direct and indirect—into the state coffers. On the other, the government streams out “freebies” in the form of subsidies, rationing, and cash transfers. The author argues that while taxes are visibly recorded as debits, subsidies masquerade as credits, creating an asymmetric picture of the nation’s fiscal health.

The tax‑freebie anatomy of the Indian budget

The piece charts the evolution of India’s tax architecture from the pre‑GST era of complex, sector‑specific levies to the unified Goods and Services Tax (GST) introduced in 2017. It notes how GST, despite streamlining revenue collection, inadvertently widened the gap between the actual amount collected and the perceived fairness of the system. By citing figures from the Ministry of Finance, the article shows that tax receipts constitute roughly 20 % of GDP, whereas subsidies and transfers account for a similar magnitude when aggregated.

The author then delves into the mechanics of subsidy spending. Food grains under the Public Distribution System (PDS) remain the largest line item, followed by fuel subsidies, sugar subsidies, and subsidies for agricultural inputs. The article highlights that while the PDS claims to serve the poor, the actual coverage is uneven, and leakage and corruption inflate the cost beyond the headline budget figures.

Fiscal deficit and the hidden cost of freebies

One of the most compelling sections of the article analyses the fiscal deficit, defined as the difference between total revenue and total expenditure. By dissecting the deficit components, the author shows that subsidies are a major driver. A footnote (linked to a detailed report from the Institute for Fiscal Studies) explains that subsidies alone contribute to roughly 5 % of GDP in deficit terms. The author underscores that this is a “silent debt” that is rarely discussed in public debates, especially when compared to headline tax receipts.

The article cites data from the Comptroller and Auditor General (CAG) to illustrate the misallocation of resources. For example, the CAG report indicates that in 2022‑23, 78 % of fuel subsidies were directed to commercial transport rather than to the rural poor. This misuse, the author argues, undermines the social objectives of subsidies while worsening the fiscal imbalance.

Re‑imagining the ledger: proposals for fiscal prudence

In the closing part of the piece, the author outlines several policy options that could reduce the burden of freebies while maintaining their intended social impact. These include:

1. Targeted subsidies – Moving away from universal schemes like PDS to means‑tested cash transfers, which can be administered through digital platforms.
2. Fuel tax reforms – Introducing a progressive fuel tax that raises rates for higher‑income earners while maintaining a lower tariff for low‑income households.
3. Enhanced tax compliance – Strengthening digital tax administration to close the revenue gap and reduce the reliance on subsidies for fiscal stability.
4. Efficiency audits – Conducting regular audits of subsidy distribution to identify leakages and redirect funds to the intended beneficiaries.

The article links to a subsequent piece on ThePrint titled “Fuel tax: A balancing act for the Indian economy,” which expands on the challenges of reforming fuel subsidies and the political economy surrounding it.

Impact on public discourse

By framing taxes and freebies as two sides of the same ledger, the author invites readers to re‑examine the conventional narrative that taxes are the sole source of public funding. The piece underscores the paradox that the same money flowing into the treasury is simultaneously being redirected out as subsidies, often without public scrutiny. It calls for greater transparency and accountability in the way the state balances its books.

Takeaway

The article provides a comprehensive overview of India’s fiscal dynamics, highlighting the substantial yet understated cost of subsidies. It presents a nuanced argument that the “debit” of taxes and the “credit” of freebies should be viewed together as part of a holistic fiscal strategy. By referencing empirical data and linking to related policy discussions, the piece encourages policymakers and citizens alike to reconsider the trade‑offs between revenue collection and welfare provision in India’s ongoing quest for fiscal sustainability.