Addressing the keynote session of a jam-packed session at the opening day of the seventh edition of JLF, Sen said "the ice has been broken" for the party even though it had a long way to go.
"They have a long way to go, but the ice has been broken and the dire need to witness some administrative reforms, can't be denied," he added.
Praising the new party, which shook the politics of the country, Sen said it sent an example of how grassroot problems could be rightly raised as electoral issues.
"Democracy is an important part of our country, we have to put it to apt use. The power of democracy has been skillfully been used recently by Aam Admi Party," he said.
The Nobel laureate economics professor said the current need of the government was to introspect on certain issues.
"Do subsidies waste economic resources? What is 'fiscal responsibility' of any government? Will subsidising diesel, electricity, food and offering low cost cooking gas among others help country grow both democratically and economically? We really need to think deeply on it," he said.
He advocated the smart use of available resources by the people of the country to help build a healthy environment to sustain economic growth.
Sen, who has been vocal on a number of contemporary issues used the platform to voice his criticism of the recent Supreme Court judgment which criminalised homosexuality.
"Article 377 of the penal code was turned by the court. The apex court 'reversed a reversal' and made a strictly private behaviour, a public crime. Is it democratic?" asked Sen.
The seventh edition of the five-day festival is set to host another Nobel laureate Harold Varmus. The line up of speakers include Jhumpha Lahiri, Jim Crace, Jonathan Franzen, Shashi Thraoor, Irrfan Khan, Javed Akhtar among others in the 175 sessions spread over six venues at the historical Diggi Palace here.