Subsidies are not a sustainable strategy. Only the richest states in the region can afford them for long. Indonesia’s subsidies are already likely to cause a budget deficit above three percent of GDP. As the South China Morning Post notes, “That would breach the country’s legal deficit cap of 3 per cent, a fiscal rule that has long helped prop up investor confidence in Southeast Asia’s largest economy.” And even while going above three percent, Jakarta cannot sustain this level of subsidies without emptying state coffers and massively impacting growth. Similarly, in India, the most populous country in the world, government subsidies simply cannot last. The AP reports: “The scale of demand in India, the world’s most populous nation, limits how long it can cap prices to shield consumers. The situation could worsen within a week if government subsidies lapse, said Duttatreya Das of the think tank Ember, noting gas supplies were the most immediate concern.”
