The folly of Indian fuel subsidies is one example of how bad demographics and bad democracy jointly threaten the country's future. In this fiscal year, the Indian government - wary of popular discontent - will spend an estimated $17.5bn or 2 per cent of national output on fuel subsidies because it refuses to pass on the greatly increased world price of energy to its citizens.
In theory the subsidies go to the poor, but in reality they are often diverted to benefit the urban rich. Perversely, subsidies also counteract such feeble attempts as there are to improve energy efficiency, and they drain the budget of funds that could be used to improve India's woeful education and healthcare.
