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Capital subsidy vs. interest subsidy: relevance to credit linked poverty alleviation programmes


, : Capital subsidy vs. interest subsidy: relevance to credit linked poverty alleviation programmes. National Bank News Review Bombay 7(8): 8-13

Subsidies and other forms of financial support are common in developing countries where the rural poor have limited monetary resources. This article compares the disadvantages and benefits of capital subsidies and interest subsidies, as provided by the Government of India for rural development. It is argued that capital subsidies do not encourage the development of forward and backward linkages and do not give a sense of ownership the recipient of the capital subsidy.

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