Why 'free' public services can cost more, as per chief economic advisor V Anantha Nageswaran

Chief Economic Advisor V Anantha Nageswaran warned that free or heavily subsidized public services come with hidden costs. In his address at the CII Tamil Nadu Infrastructure Summit 2026, Nageswaran stated that below-cost infrastructure pricing is unsustainable. He emphasized that political approaches to utility pricing, urban planning, and infrastructure financing can weaken the country's long-term economic health.

Nageswaran explained that offering services like water for free tends to make people believe they are unlimited, leading to wastage. He emphasized that "free" is the most expensive word in public policy, as such services often end up destroying them. Nageswaran also pointed out that low utility prices make it hard to attract long-term investment in infrastructure.

He noted that investors require stable returns over 20 to 30 years, which necessitates users paying fair prices for services. The CEA highlighted that free water often benefits households with piped connections while poor families without such access are forced to buy water from private tankers at much higher prices. Charging the right price for utilities would enable governments to support vulnerable people directly while providing utility providers with the necessary funds to expand services.

Nageswaran warned that free infrastructure always comes at a cost, as someone will ultimately bear the burden – either through paying fair prices, taxpayers bearing the cost, or public assets suffering due to poor maintenance. He also criticized low Floor Space Index (FSI) limits in cities, which push cities to spread out, raise land prices, and encourage construction on natural water bodies, leading to severe flooding and droughts.

Referring to Chennai's 2019 water crisis, Nageswaran stressed that policymakers should remember the lessons from that event. He concluded by stating that India has recorded 7.7% economic growth, with Union government capital expenditure increasing four-fold to over ₹12 lakh crore. However, he emphasized that government spending alone cannot support infrastructure development, and the nation must adopt discipline in honoring contracts, building to last, and pricing utilities honestly and courageously.