Subsidies (Objectives, Characteristics, Classification and Examples)

Subsidies are part of the interventionist mechanisms of the States in national economies, they are also known by the term subsidy and consist of government support to individuals and legal entities that develop priority activities of interest and social benefit.

This support from entities of the public administration It can be granted in monetary form, or through goods and services to individuals that, otherwise, they could not perform.

This inability of individuals is due to the high costs they must incur to carry out their projects, These are amounts of money, they have the characteristic of being so high that it is impossible for them to be able to pay it.

It can also be said that subsidies are intervention techniques of the public administration, which serve several purposes.

Objectives of the Grants

The purpose of awarding the grants lies in:

• Support business opening, motivating investment in new businesses.
• Avoid company closures or possible bankruptcy.
• Maintain the balance of the economy by promoting its stability.
• Leverage a stagnant sector of the economy.
• Promote competition in the markets.
• Prevent the adverse effects that could have a financial impact on the economy.
• Stabilize and maintain prices and control inflation levels.
• Promote consumption, distribution and trade in goods and services.
• Support the advancement and development of new technologies.
• Promote activities in the agricultural, livestock, industrial and service sectors.

Subsidy characteristics

Some of the most notable features seen in grants are:

• The public entity that grants the subsidy causes an act of disposition of the public spending, this fact produces the benefit for the natural or legal person who receives it.
• Subsidies are awarded for a public purpose and interest, so it must be for the benefit of the group.
• It is a legal link between the beneficiary and the Administration, this is so since if the former meets the requirements of the Law, has the right to choose and receive the subsidy, in addition, consequently, is obliged to comply with the activity for which it was granted.
• In the same way, the Administration, when granting and delivering the subsidy, has the power to supervise and inspect the activities, revoke the subsidy in case of non-compliance and impose the sanctions that give rise in case of infringement.

Classification of Grants

Grants can be:

• Nominated: if they are considered in the budget or in reformed credits stipulated in the exercise.
• Generic: if they have been stipulated within the budget and correspond to several beneficiaries.
• Specific: the beneficiary is favored in a particular way in favor of a public interest.

In addition, depending on their purpose, the grants can be:

• Granted to guarantee at least the minimum profitability or to compensate for possible deficits in the exploitation.
• Awarded for the financing of some specific expenses.
• For the acquisition of financial and intangible assets.
• For the payment of liabilities or debt forgiveness.

Examples of Grants

In all countries there are countless examples of grants granted by governments to individuals or companies in order to ensure certain activities for the collective benefit and public interest.

Some of the economic sectors benefited with subsidies are:

• Agricultural activities.
• Public transport services.
• Health services.
• The education.
• The productions of cinematographic companies.
• Research, development and innovation activities, commonly called R + D + I.
• Campaigns to preserve the environment and non-renewable natural resources.
• Energy production.