Home / Opinion / On AAP and subsidies

Arvind Kejriwal has begun to deliver on his promise to shower freebies. He has cut the price of electricity as well as offered free water to residents of New Delhi up to a certain minimum level of consumption.

These policies will not benefit the really poor and will blow a neat hole in the finances of the Delhi state government.

Subsidies are always politically attractive. But here is a cautionary tale for the Aam Aadmi Party. Over the past decade, the two Manmohan Singh governments have spent a cumulative 11 trillion on subsidies, a large chunk of which are captured by large farmers (the fertilizer subsidy) and the middle class (fuel subsidies).

India—and its poor—would have been far better off if even half that money had been spent on asset creation: roads, schools, hospitals, irrigation projects, etc.

Kejriwal means well. He should use tax revenues to build rather than to subsidize.

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