It all started with the government trying to win the votes
of the farmers and promised them subsidies and write-off on their loans from
the banks. This led to huge amounts of
money being written off as bad loans and the money accumulated to such enormous
amounts that most government banks had their market share and shares go below
their actual value due to the debt that they incurred.
When any company or even anybody that has more debt than
they are generating income, for the next succeeding years it is always hard for
them to balance their balance sheets. The thing is you’re trying to match the
positives and the negatives of balance sheet. You can technically write this off, but on the
actual books, you are in the red. Once
you are in the red, it now becomes the race to equal it off or come back into
the black or positive side of the balance sheet.
Suppose I have a book that is worth 10, but I’m giving it to
you for 8. If my manufacturing or
production cost is less than 8, then whatever I’m making will be gross profit
and after forgoing my costs and other expenses it will be my net income/profit.
Until the cost that I’m providing it to
you does not go below my manufacturing or production cost, I will still make a
profit but at a lower amount.
Subsidies and its Impact on Economy
by
Devesh Prabhu
on
9:08:00 PM
It all started with the government trying to win the votes of the farmers and promised them subsidies and write-off on their loans from th...
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