In her first budget as Chief Minister and Finance Minister of Delhi, Rekha Gupta has taken bold steps to increase capital expenditure, signalling a shift towards infrastructure-led growth

In the Budget for the National Capital Territory (NCT) of Delhi for the financial year (FY) 2025-26 presented on March 24, 2025, Rekha Gupta the Chief Minister (she also holds the finance portfolio) has done ‘heavy lifting’ by substantially boosting capital expenditure even while making some smart moves to lower the burden of its poll pledges. At the outset, let us take a look at FY 2024-25.    

For the FY 2024-25, Atishi the then finance minister under the AAP Government had budgeted for total expenditure (TE) of Rs 76,000 crore including revenue expenditure (RE) of Rs 61,000 crore and capital expenditure (CE) of Rs 15,000 crore. Against this, the revised estimate of TE has turned out to be Rs 6,500 crore less at Rs 69,500 crore. While the RE at Rs 55,500 crore is lower by Rs 5,500 crore, the capital expenditure too is down by Rs 1000 crore to Rs 14,000 crore.       

The shortfall in actual expenditure over the budgeted level is a clear manifestation of poor economic management by the erstwhile AAP dispensation. On the capital side, the inability to spend even the budgeted amount shows the slow pace of project execution. Besides, the umpteen instances of irregularities and misappropriation of funds as brought out in the reports of the Comptroller and Auditor General (CAG) raises doubts about whether the amount spent went for the intended purpose.

The significant shortfall in spending on the revenue side also points towards serious lapses in governance.    

For FY 2025-26, the incumbent Rekha Government has proposed TE of Rs 100,000 crore which is a massive Rs 30,500 crore higher than the revised estimate of Rs 69,500 crore for FY 2024-25. Out of this, the capital expenditure for FY 2025-26 at Rs 28,000 crore is double the actual for FY 2024-25 at Rs 14,000 crore. Even the RE for FY 2025-26 at Rs 72,000 crore is Rs 16,500 crore higher than the actual for FY 2024-25 at Rs 55,500 crore — an increase of around 30 per cent.

An important criterion for testing whether a Budget is good is the proportion of the total spend it provides for capital expenditure on building assets like roads, bridges, flyovers, expressways, drainage systems, pipelines etc as this assures a regular income stream in the long-term besides providing jobs on a sustainable basis.

The capital expenditure for FY 2025-26 at Rs 28,000 crore works out to 28 per cent of the TE as against only 20 per cent for FY 2024-25. Correspondingly, the RE is down to 72 per cent during FY 2025-26 from 80 per cent during FY 2024-25.

Setting an ambitious target by itself won’t be of any use unless this is accompanied by garnering the required resources to support the desired spending level. The Government has projected a total revenue of Rs 69,950 crore for the FY 2025-26. This includes tax revenue of Rs 68,700 crore (GST and VAT: Rs 49,000 crore, excise duty: Rs 7000 crore, stamp duty or registration fee: Rs 9000 crore and levies on motor vehicles: Rs 3700 crore), non-tax revenue of Rs 750 crore and other capital receipts of around Rs 500 crore.

The tax revenue for FY 2024-25 is Rs 59,200 crore (as per revised estimate), aiming at tax revenue of Rs 68,700 crore for FY 2025-26 which works out to 17 per cent more seems a bit unrealistic. Assuming this will materialise, still the estimated total revenue of Rs 69,950 crore for FY 2025-26 will fall short of even the RE resulting in a revenue deficit (RD) of Rs 2050 crore. Add to this the capital expenditure of Rs 28,000 crore, the Government could end up with a fiscal deficit (FD) of Rs 30,050 crore. But, the picture projected by Rekha Gupta is much less bleak than what these numbers would suggest.

This has been made possible by what she has termed as ‘Union government’s aid for capital projects’. A substantial provision of Rs 12,096 crore has been made under this head and included under ‘non-tax receipts’ of the Delhi budget.

This boosts the total revenue for FY 2025-26 to Rs 82,046 crore (69,950+12,096). Minus RE of Rs 72,000 crore, we get a ‘revenue surplus’ of Rs 10,046 crore (instead of RD of Rs 2050 crore). One wonders whether an amount received by the Delhi Government from the Centre could be justified as a ‘legitimate’ source of revenue earned by the former.

On the basis that this is tenable and the Delhi Government gets to a total revenue of Rs 82,046 crore, the TE being Rs 100,000 crore, it would still be left with a gap of Rs 17,954 crore.

Taking into account an ‘opening balance’ of Rs 2,965 crore at the start of FY 2025-26, the gap is reduced to Rs 14,989 crore or say Rs 15,000 crore. So, Delhi will still be saddled with an FD of Rs 15,000 crore for which it intends to take a loan from the National Small Savings Fund (NSSF).      

During the elections, Prime Minister Narendra Modi had given several guarantees, the prominent ones being Rs 2,500 a month to women under Mahila Samridhi Yojana (MSY), Rs  21,000 to pregnant women, LPG cylinders at subsidised price of Rs 500 and free cylinder on Holi and Diwali, implementation of Ayushman Bharat scheme and additional cover of Rs 500,000 for senior citizens and so on. Redeeming these promises ‘in toto’ would have led to a mind-boggling increase in the RE. But, a deft handling of this issue by Team Rekha has salvaged the situation.

For instance, implementing MSY as promised ie giving cash assistance of Rs 2500 per month to ‘every’ woman above the age of 18 years in Delhi (their number is 6700,000) would have cost the exchequer Rs 20,100 crore per annum. However, by restricting the assistance only to BPL families, it has reined in the outgo at just about one-fourth or Rs 5100 crore.

Besides having to deal with the political ramifications of not implementing its promises in toto, the Government will have a tough time managing its finances. To get a jump of around Rs 10,000 crore in Delhi’s tax revenue over a high of Rs 59,000 crore achieved during FY 2024-25 will be daunting. Then, you have the highest ever fiscal deficit of Rs 15,000 crore and the cost it will entail by way of additional interest payments.

The Government can’t also be oblivious of its other liabilities currently not reflected on its books. For instance, its department the Delhi Jal Board (DJB) has a debt of over Rs 70,000 crore. Likewise, according to the CAG, Delhi Transport Corporation (DTC) had incurred a cumulative loss of Rs 60,000 crore at the end of FY 2021-22.

These would have ballooned further during the following three FYs till the end of March 2025. The liability for servicing those debts of Rs 130,000 crore plus is vested entirely in the NCT Government.

The government will also have to reckon with regulatory assets (RAs) of power distribution companies or discoms worth Rs 27,000 crore.

RAs are created when the Delhi Electricity Regulatory Commissions (DERC) accept that the tariffs don’t cover discoms’ purchase costs but don’t raise rates. The resulting gap is booked by discoms as RA. Even as the government has vowed to protect consumers from tariff hikes, it will have to find money to pay for this massive liability. Team Rekha faces a “tough terrain” ahead.

(The author is a policy analyst. Views expressed are personal)