The Fiscal and Welfare Impacts of Reforming Fuel Subsidies in India

David Coady, Rahul Anand, Adil Mohommad and Vimal Thakoor

Working Papers from eSocialSciences

Abstract: This paper evaluates the fiscal and welfare implications of fuel subsidy reform in India. Fuel subsidies are found to be badly targeted, with the richest ten percent of households receiving seven times more in benefits than the poorest ten percent. Although subsidy reform would generate substantial fiscal savings, the associated increases in fuel and other prices would lower household real incomes of all income groups. Better targeting of fuel subsidies would fully protect lower income households while still generating substantial net fiscal savings. Lessons from subsidy reforms in other countries are identified and discussed.

Keywords: Fiscal; welfare; impacts; reforming; fuel subsidies; India; prices; subsidy reforms; Fuel pricing; subsidy; distributional impact; compensating transfers; households; income; fiscal savings; lessons; impact; target. (search for similar items in EconPapers)
Date: 2015-03
Note: Institutional Papers
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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