Sunday, October 09, 2005

Shekhar Gupta on subsidies

Shekhar Gupta has a nice editorial in Saturday's (8th Oct) Indian Express. He discusses the issue of large government subsidies (power, water, LPG and higher education) benefitting the middle and upper middle classes - rather than the poor. Subsidies create market distortions - and end up benefitting everybody but the poor. At the same time, misplaced subsidies have created unrealistic expectations amongst the middle class - cheap power (protests against 10% tariff hikes), cheap water, cheap education etc. How does one begin to build political consensus for the reform of public utilities and the phasing out of government subsidies? In large part, this will depend on the results of the privatization that has taken place so far, and whether there are any perceived efficiency gains - in Delhi, the results are clearly mixed. Also, for those based in Delhi and interested in regulatory issues, NCAER is organizing a seminar in Delhi on Monday - details are on the website.
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