Chief Economic Advisor V. Anantha Nageswaran warned that providing water for free leads to waste and hampers long-term infrastructure investment. He argued that sustainable development requires realistic pricing to attract private capital from pension funds and insurers.
Chief Economic Advisor (CEA) V. Anantha Nageswaran has cautioned that the policy of providing public services like water for free is economically unsustainable. Speaking at the CII Tamil Nadu Infrastructure Summit in Chennai, Nageswaran labeled 'free' as the most expensive word in public policy. He argued that when water is priced at zero, it is perceived as an infinite resource, which inevitably leads to significant wastage and inefficient supply management.
Impact on Long-term Investment
Nageswaran emphasized that infrastructure projects built on the promise of free or heavily subsidized services often fail to provide the stable, predictable returns needed by institutional investors. He identified patient capital—such as money from pension funds and insurance companies—as essential for building modern infrastructure. However, he noted that such investors are unlikely to commit resources if the underlying assets are not economically viable. The CEA's comments highlight a growing tension between populist policy measures and the need for fiscal discipline in resource management.
Building Economic Resilience
Beyond water pricing, the CEA discussed the challenges facing the Indian economy in a changing global environment. He pointed to several factors that necessitate a strategic approach to growth, including a weakening rules-based international trade order, the increasing weaponization of global supply chains, and rising climate risks. Additionally, he noted that the rapid advancement of Artificial Intelligence may reduce the traditional labor-cost advantages that developing economies have historically relied upon.
Moving Toward Bankable Projects
While public spending has been a primary driver of infrastructure growth in India, the CEA stated that government funding alone is insufficient to meet the country's vast requirements. The session also featured industry perspectives from the CII, where leaders discussed the gap between available capital and the actual number of bankable projects. Participants suggested that innovative solutions, such as the creation of large industrial land banks, are necessary to improve competitiveness. For investors and market observers, the key monitorable remains whether policy frameworks will shift toward cost-reflective pricing for utilities, which could improve the balance sheets of infrastructure-linked companies and encourage larger private sector participation in the coming years.