Chief Economic Advisor V Anantha Nageswaran on Monday, 3 August 2026 warned that below-cost pricing of public utilities and infrastructure creates deep economic distortions — ultimately burdening taxpayers, eroding asset quality, and leaving the most vulnerable citizens underserved. He made the remarks at the CII Tamil Nadu Infrastructure Summit 2026 in New Delhi.

The Core Argument

“Free is the most expensive word in public policy,” Nageswaran said, encapsulating his central thesis. He argued that every public service carries a real cost, and that cost is invariably borne by someone — either users through tariffs, the broader public through subsidies, or society at large through the neglect and deterioration of infrastructure assets.

Building infrastructure on the promise of below-cost services, he said, is inherently contradictory: the revenue shortfall that results from underpricing directly undermines the capacity to maintain and expand the very networks that citizens depend on.

Who Really Bears the Burden

Nageswaran challenged the widely held assumption that underpricing utilities functions as an effective social safety net. Such policies, he argued, disproportionately benefit households that already have access to services, while the most economically vulnerable segments remain underserved.

He cited the case of water pricing as a pointed illustration: households without access to piped water frequently purchase water from private suppliers at rates significantly higher than standard utility charges. Zero-priced or heavily subsidised piped water, in effect, subsidises connected households while unconnected ones pay a steep market premium.

Pricing essential services at zero, he further noted, encourages overconsumption and waste — consumers begin treating scarce resources as unlimited, compounding supply pressures over time.

The Case for Honest Pricing

The CEA made the case for what he called ‘honest pricing’: setting tariffs that reflect the true economic cost of service delivery, while using the resulting fiscal headroom to provide targeted support to genuinely vulnerable groups. This approach, he argued, would allow utilities to generate sufficient revenue to maintain existing infrastructure and fund expansion — a prerequisite for attracting long-term private investment.

Nageswaran stressed that sustainable pricing is also critical for drawing institutional capital into infrastructure financing, a sector that India needs to scale significantly to support its growth ambitions.

India’s Growth Context

Situating his remarks within India’s broader economic trajectory, Nageswaran highlighted the country’s GDP growth of 7.7 per cent and a sharp rise in government capital expenditure as signs of underlying resilience. However, he cautioned that public spending alone cannot sustain growth indefinitely — a signal that the Centre must create conditions for private and institutional capital to step in, including through credible utility pricing frameworks.

What This Signals for Policy

The remarks carry weight given Nageswaran’s role as the government’s principal economic voice. They arrive at a time when several state governments have expanded free or heavily subsidised utility schemes — a practice that has drawn periodic scrutiny from fiscal watchdogs and the Reserve Bank of India. Whether the Centre translates this advisory position into concrete policy guidance on state-level freebies remains to be seen.