Should we treat subsidies as transfer payment or not? Explain for 3 marks

No, subsidies are different from transfer payments. Transfer payments refer to those payments in exchange of which no factor services are employed. That is, such payments are made with the mere motive of transferring the purchasing power to a specific section of the society such as old persons, students, destitute women, etc. Some of the example of transfer payments are old age pension, unemployment allowance, etc. are transfer payments. Such payments are excluded in the estimation of National Income.
Whereas, subsidy is a form of financial or in kind of support extended to an economic sector or institution, business etc generally with the aim of promoting economic and social policy.