Transport crises reveal urgent need for resilient infrastructure.
Recent train and flight chaos shows cheap public services need investment, while deregulated prices harm welfare when monopolies dominate.
Over the past few months, India’s transport system has been pushed to its limits. In October and November, trains heading to Bihar were overwhelmed with an extraordinary rush of passengers. Migrant workers travelling home for Chhath Puja and the Bihar elections found themselves packed into severely overcrowded unreserved coaches. With too few trains to meet the sudden demand, many were forced to endure unsafe, cramped, and uncomfortable journeys. Then, in December, Indigo’s mass flight cancellations — triggered by regulatory non-compliance — left passengers stranded at airports across the country. With supply suddenly shrinking, airfares spiked, creating a second wave of travel distress.
These two events offer a valuable window into how prices react to sudden shocks in demand or supply, and how both governments and private players behave in such situations. Yet the contrast between how prices behaved — and how each sector responded — also highlights a deeper structural problem: in a neo-liberal economic framework, both under-priced public services and deregulated private markets can end up reducing public welfare. Low prices alone cannot improve well-being unless the state also invests heavily in capacity, while free pricing in sectors dominated by monopolies ends up hurting consumers.
Understanding the Railways’ Demand Shock
The chaos on Bihar-bound trains is a clear example of a demand shock. When a sudden spike in demand occurs while supply remains fixed, economic theory predicts that prices should rise until supply and demand reach equilibrium. But Indian Railways keeps fares fixed and affordable, a deliberate policy choice rooted in the need for equity. When prices cannot rise, excess demand manifests as overcrowding. More passengers attempt to board the same trains, leading to dangerous and undignified travel conditions.
In a different scenario, raising prices could have reduced demand to manageable levels. But doing so would also price out millions of low-income travellers. The deeper issue lies in the constraints placed on government spending. Neo-liberal rules limit the fiscal deficit, restricting how much the government can invest in expanding public infrastructure like trains, tracks, and coaches. One potential way around this is raising more revenue through progressive taxation. According to Thomas Piketty’s research, even modest taxes on the wealthiest 1% could generate substantial resources to strengthen public services. But such measures face strong resistance from domestic and global capital, making large-scale investment in public transport politically difficult.
Monopoly Power and the Flight Crisis
The Indigo episode reflects the other side of the same economic model — deregulated private markets. When the airline canceled hundreds of flights due to regulatory issues, supply shrank sharply. With fewer seats available, fares shot up. In theory, flexible pricing helps distribute scarce resources efficiently. But this only holds in competitive markets. In reality, Indian aviation is dominated by a handful of big players, with Indigo controlling a massive share. When a sector is so concentrated, price surges become unavoidable during disruptions, and consumers have no meaningful alternatives.
The U.S. faced a similar situation during Joe Biden’s presidency: supply chain disruptions caused by the pandemic were worsened by corporate pricing power. Monopolies translated rising costs into steep consumer prices, contributing to inflation and political fallout. These examples show that deregulated pricing assumes competition — but when monopolies exist, it only magnifies consumer hardship.
The Common Thread
At first glance, overcrowded trains and expensive flights seem like unrelated problems. But they stem from the same underlying framework. A neo-liberal system restricts the state’s ability to tax and spend, leading to under-investment in essential public services that must nonetheless remain affordable. At the same time, it encourages deregulation of private markets, which then consolidate into monopolies capable of charging high prices.
The result: low-quality, overcrowded public services on one side, and expensive, market-dominated private services on the other. Unless India addresses both the weakening of public infrastructure and the unchecked concentration of private capital, transport crises like these will continue to repeat.