The granting of cash subsidy on the capital investment is called ______________.
|A. Concessional finance.|
B. Quantum of Subsidy.
C. Interest Subsidy.
D. Central Investment Subsidy.
The Correct Answer Is:
- D. Central Investment Subsidy.
The correct answer is option (D), “Central Investment Subsidy.” This term refers to the granting of cash subsidies on capital investment, often provided by the central government to promote economic development. To understand why this answer is correct, let’s delve into the concept of central investment subsidy and then explain why the other options are not correct.
Explanation of the Correct Answer (Option D – Central Investment Subsidy):
Central Investment Subsidy is a financial incentive provided by the central government to promote investment in specific sectors or regions. It typically involves the provision of cash subsidies or grants to businesses or individuals who are making capital investments in designated areas or industries.
These subsidies are aimed at encouraging economic growth, stimulating industrial development, and supporting strategic sectors of the economy.
Key points that illustrate why option (D) is correct:
1. Cash Subsidy on Capital Investment:
Central Investment Subsidy explicitly involves the granting of cash subsidies on capital investment. These subsidies can be in the form of grants or financial assistance to offset a portion of the initial capital outlay made by businesses or individuals for the establishment or expansion of their ventures.
2. Central Government Initiative:
The term “central” in “Central Investment Subsidy” indicates that these subsidies are typically administered and funded by the central or federal government. In many countries, central governments allocate budgets for investment subsidies to support specific sectors or regions as part of their economic development policies.
Now, let’s discuss why the other options are not correct:
A. Concessional Finance:
Concessional finance typically involves offering loans or credit to businesses or individuals at favorable terms, such as lower interest rates, longer repayment periods, or grace periods. It does not involve the granting of cash subsidies.
Concessional finance aims to make borrowing more affordable and accessible, but it is fundamentally different from cash subsidies on capital investments. Subsidies do not need to be repaid, while concessional finance does.
B. Quantum of Subsidy:
“Quantum of Subsidy” does not represent the granting of subsidies but rather refers to the amount or magnitude of the subsidy provided. It is a measure or expression of the subsidy’s size or scale rather than a specific term for the act of granting subsidies. Therefore, this option does not accurately describe the concept of providing subsidies.
C. Interest Subsidy:
Interest subsidy is a form of financial assistance where the government covers a portion of the interest expenses on loans taken by businesses or individuals. It aims to reduce the cost of borrowing and make loans more affordable.
Interest subsidies focus on easing the financial burden of interest payments, while central investment subsidies are geared toward providing direct financial support for capital investments. They are distinct in their objectives and the manner in which they offer financial assistance.
In summary, “Central Investment Subsidy” is the correct term for the granting of cash subsidies on capital investment by the central government. These subsidies are intended to stimulate economic growth, support industrial development, and promote investment in specific sectors or regions.
Options (A), (B), and (C) do not accurately represent this concept, as they pertain to different forms of financial incentives or considerations related to subsidies rather than the act of providing cash subsidies on capital investments.