The dielectric constant of water is very high. Then why is it not used as a dielectric in the condenser?
Water could be considered as a dielectric because it has a good relative permittivity value (some 80's at 20 C). But, it also has some conductivity (or else electric circuits won't give shocks when touched..!). Water comes out to be dielectric because of the dielectric polarization (it's an electric dipole and is a highly polar molecule & even rotates - aligning itself in field direction) associated with it. The electric field induced by polarization overcomes the effect caused by applied electric field. But, this field could be easily overcome there's also something you need to know called Dielectric breakdown (which is 60-70 Mega Volt / m for Distilled water). This voltage could be readily overcome by an applied electric field and BTW - Water starts conducting...
Note: But, domestic water usually contains several kinds of salts like $NaCl$, etc. which dissipate into ions in a solution (by Arrhenius theory) as $Na^+,Cl^-$ etc. I think you know that the presence of charged particles (like ions) in a solution allows it to conduct electricity. BUT, water doesn't actually play a role of conducting here. It's just the medium...
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