Kejriwal's waterfront

AAP's water subsidy for Delhi is a perfect example of reverse Robin Hood engineering taking from the poor and giving to the rich.

It is great news that the Aam Aadmi Party (AAP) has decided to go national and contest the 2014 Lok Sabha polls. This will definitely increase competition, and competition in politics, as in economics, provides great returns to the citizenry.

By announcing its two ostensibly pro-poor pro-aam aadmi policies concerning water and electricity, the AAP has made its economic vision for the country clear. Note that I am not crediting the AAP with its vision of a corruption-free economy and polity. That is a goal of everybody, including mothers for motherhood, and any significant reduction of corruption will be a major contribution to Indian democracy and its economy.

It is well known, including by policymakers within the AAP, that discretion in decision-making increases corruption. As do distortions in the pricing mechanism (see water table). For example, if the government prices kerosene substantially below diesel, then the policy encourages corruption by making it profitable to mix kerosene with diesel.

One of the most intriguing features of the AAP's policy on water (and electricity) is their pro-rich stance. How did this happen? As the table shows, the water policy goes significantly against the poor and the lower middle class. One of the most stylised facts about development, incomes and poverty is that larger family households are poorer. As the table shows, households with a family size greater than or equal to five members have average expenditure levels (NSSO 2011-12 data for Delhi households) only twice the poverty line. These households will pay for all the water consumed because their usage is higher on a per household basis. In contrast, those who need water less and can afford to pay more (with per capita expenditures almost four times the poverty line), will receive water free. The poor will pay Rs 663 crore to the AAP's water board; the rich will receive Rs 333 crore from the AAP as subsidy. What Arvind Kejriwal and the AAP's water policy illustrates is a perfect inversion of Robin Hood something corrupt in-the-name-of-the-poor Indian governments have attempted but not succeeded at so perfectly. I challenge anyone to imagine, let alone formulate, a more anti-poor and anti-lower-middle class policy. Phrased differently, can anyone formulate a more pro-rich policy?

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