Despite Government doling out subsidy to the tune of Rs3,77,616  crore on food, fuel, railway fertiliser and others, only a few people out of the targeted poor are reaping benefits out of it. The subsidy amount is 4.24 per cent of the gross domestic product (GDP).

Stating that price subsidies are regressive, the economic survey said, "Rich household benefits more from the subsidy than a poor household. If one were to plot the distribution of welfare gains against income, the benefits of a regressive price subsidy would increase as we move up the income distribution."

Of the 67.2 per cent of household that are electrified, richer households use more electricity. The top quintile of consumers captures 37 per cent of the electricity subsidies where as the bottom quintile captured only 10 per cent of the total subsidy amount, which is Rs32,300 crore.

The richer sector of the population got more benefited from the subsidies of Rs 23,746 for liquefied Petroleum Gas (lPG) as the poorest 50 per cent of household consumed only 25 per cent of the lPG

Price subsidies can hurt the poor in a way that subsidies can distort the incentives of consumers and producers and result in mis-allocation of the resources across sectors and firms.

Economic survey also added that price subsidies have formed an important part of the anti-poverty discourse in India, but a closer look at it reveals that why they are not government's best weapon.

leakages have been an issue in the case of product subsidies. The subsidised goods are not reaching to the targeted audience due to leakages, which further weaken the effectiveness of product subsidies.

"leakages not only have the direct cost of wastage, but also the opportunity cost of how the Government could otherwise have deployed those fiscal resources," said economic survey.

A total of Rs1,29,000 crore was spent by the Government by giving food subsidy in the FY 2014-15 but due to leakages 54 per cent of wheat and 15 per cent of rice got lost. This resulted in the loss of Rs18,400 crore.

So, the goal of the Government is to convert all subsidies into direct benefit transfers in a way that it should not slow down the pace of reform but the process might take some time.