“Grant” is a word of Latin origin and in translation means “donation”, “gift”. Today, there are several different interpretations of this term.
Grants are primarily intergovernmental transfers. They are provided irrevocably and free of charge. In this case, the purpose and conditions of the use of funds do not matter.
Grants are also money that organizations receive when their spending on the production and sale of manufactured products exceeds the profit from the sale of this product. These funds are allocated either from the local or state budget.
Grants are also payments to the employee. In this case, they must be stipulated in a legislative act or an employment contract. So, for example, subsidies can be allocated to employees for food, travel to work, for minor children.
Grants are funds that can be used to offset increased costs and cover losses. Those enterprises that receive these funds avoid bankruptcy. Due to the fact that payments that are allocated from the budget compensate for part of the prices of individual goods and services. Thus, a rise in retail prices is prevented.
If subsidies for enterprises were not provided, then a substantial part of the costs would be forced to cover consumers. This, in turn, would provoke a significant increase in consumer prices. Along with this, subsidies are paid from budget funds to prevent price increases. This leads to budget deficits. In this regard, an additional emission is formed, which can cause inflation.
In accordance with the type of economic system in the country, subsidies are assigned one or another position. So, if state administration prevails, then the application of such payments will be widespread enough. In a market economy, subsidies are less in demand due to the presence of strict requirements for self-sufficiency and self-financing.
The producer, receiving a budgetary payment, acquires at the same time the opportunity to sell the products manufactured by him in the prescribed amount at the cost that will interest the consumer, because it will not be overstated.
Grants are paid to enterprises with low profitability, but of great importance to the national economy. So, as a rule, payments are received by agricultural production, housing and communal services, socio-cultural institutions, fundamental science.
If the country is dominated by a “closed” type of economy, then subsidies prevent price increases, the state, and not the consumer, takes on the costs. In states where the “open” economy dominates, these payments allow supporting national producers and stimulating domestic demand. Along with this, there has been an increase in employment, an increase in living standards. Payments stimulate the production of socially significant products, services, works and their subsequent implementation at affordable prices for all segments of the population.
In this case, the difference between the concepts of "subsidies", "subventions", "subsidies" should be taken into account.
So, in the first case, an allowance in kind or in cash is expected, which is provided at the expense of the local or state budget.
A subvention is a special type of cash benefit from the state allocated to the authorities for specific purposes and for a certain period of time. In case of misuse of funds in this case, they are subject to return.
Moreover, all payments (subsidies, subventions, subsidies) are combined by the fact that they are financed from the budget.
