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The Fiscal and Welfare Impacts of Reforming Fuel Subsidies in India

Author

Listed:
  • David Coady
  • Rahul Anand
  • Adil Mohommad
  • Vimal Thakoor

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.

Suggested Citation

  • David Coady & Rahul Anand & Adil Mohommad & Vimal Thakoor, 2015. "The Fiscal and Welfare Impacts of Reforming Fuel Subsidies in India," Working Papers id:6575, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:6575
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    References listed on IDEAS

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    1. Surajit Das & Sukanya Bose & N. R. Bhanumurthy, 2014. "Oil Price Shock, Pass-Through Policy and its Impact on India," India Studies in Business and Economics, in: Ratan Khasnabis & Indrani Chakraborty (ed.), Market, Regulations and Finance, edition 127, chapter 13, pages 231-253, Springer.
    2. Anand, Mukesh Kumar, 2012. "Diesel Pricing in India: Entangled in Policy Maze," Working Papers 12/108, National Institute of Public Finance and Policy.
    3. Norbert Schady & Ariel Fiszbein & Francisco H.G. Ferreira & Niall Keleher & Margaret Grosh & Pedro Olinto & Emmanuel Skoufias, 2009. "Conditional Cash Transfers : Reducing Present and Future Poverty," World Bank Publications - Books, The World Bank Group, number 2597.
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    Cited by:

    1. Cecile Couharde & Sara Mouhoud, 2020. "Fossil Fuel Subsidies, Income Inequality, And Poverty: Evidence From Developing Countries," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 981-1006, December.

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