Chief Economic Advisor V Anantha Nageswaran Warns That ‘Free’ Public Services May Lead to Higher Hidden Costs for Society.

The recent comments from Chief Economic Advisor V Anantha Nageswaran underscore a critical examination of public policy regarding utility pricing and infrastructure development in India. Speaking at the CII Tamil Nadu Infrastructure Summit 2026, Nageswaran articulated the paradox of free or subsidized public services, emphasizing that these offerings often come at significant hidden costs. He pointed out that charging below-cost prices for essential services like water not only encourages wastage but also hampers long-term investments in infrastructure, essential for sustainable economic growth. The fundamental message conveyed is that while the notion of ‘free’ services may appear beneficial, it typically undermines the long-term viability of critical resources, disproportionately affecting those disadvantaged groups the policies aim to help.

Nageswaran also critiqued the existing economic framework, arguing that low utility prices contribute to a lack of investment in infrastructure, as capital tends to flow towards environments that promise stable and fair returns. By prioritizing immediate accessibility over sustainable practices, the government risks alienating private investors, which could stifle future developments. He stressed that fair pricing mechanisms enable governments to allocate funds efficiently and provide targeted support to marginalized communities, rather than implementing blanket policies that fail to address the underlying issues.

Additionally, the CEA drew attention to the implications of stringent Floor Space Index (FSI) limits on urban development, warning that these constraints push cities outward, inflating land prices and exacerbating flooding risks. Citing the 2019 water crisis in Chennai as a critical lesson, he advocated for urban planning that factors in environmental sustainability and resilience against climate impacts. Such holistic governance would necessitate a shift in policy-making towards promoting responsible urban growth and resource management.

Despite an impressive economic growth rate of 7.7% and a significant increase in capital expenditure, Nageswaran cautioned against relying solely on public spending for infrastructure advancement. He insisted on the imperative for the Indian government to foster a culture of accountability and integrity in contract adherence, as well as to engage the private sector in meaningful partnership. These steps are essential for establishing a robust economic trajectory that can withstand both internal challenges and external pressures.

Source: Hindustan Times

(Expert Note: This report was prepared by the Wealthova team.)