BJP Government in Delhi Faces Rs 13,000 Crore Additional Subsidy Bill to Fund Welfare Promises

The BJP-led government in Delhi is facing a challenging fiscal situation as it prepares to honor its election promises, with a need to find an additional Rs 13,000 crore to fund new welfare schemes. This amount is in addition to the Rs 11,000 crore already allocated to electricity subsidies and other welfare subsidies that the BJP has pledged to continue. As a result, the total subsidy bill for Delhi is set to rise to nearly 30% of the city’s budget.

Highlights:

• The incoming BJP government in Delhi will need to find over Rs 13,000 crore to fund welfare schemes.
• Delhi’s subsidy bill is expected to rise to nearly 30% of the city’s budget.
• The Rs 13,000 crore is on top of the Rs 11,000 crore already spent on electricity subsidies and other welfare schemes.
• Women-centric welfare schemes, including a Rs 2,500 monthly transfer to lower-income women, are expected to cost Rs 11,400 crore.
• Delhi BJP won 48 of the 70 assembly seats, with a significant share from constituencies with higher proportions of women voters.

The Cost of Welfare Schemes

One of the key promises made by the BJP is a scheme that will provide Rs 2,500 per month to women from lower-income households. With 3.8 million women eligible in Delhi, the cost of this initiative alone could reach Rs 11,400 crore. This scheme mirrors similar cash transfer initiatives in states like Maharashtra and Madhya Pradesh, where the BJP is either in power or part of the ruling coalition.

Other welfare promises include:

• Rs 21,000 to pregnant women, adding a few hundred crores to the subsidy bill.
• Increased pension payouts for seniors, with those aged between 60 to 70 set to receive Rs 2,500 a month (up from Rs 2,000), and those over 70 to receive an additional Rs 500.

Can Delhi Afford These Subsidies?

While Delhi is known for maintaining one of the lowest fiscal deficits in India, with a revenue surplus until now, the new subsidy commitments will likely change the fiscal outlook. The government had expected a Rs 3,231 crore revenue surplus for FY25, but this could turn into a revenue deficit if the spending commitments are fully realized.

Cutting back on capital expenditure (capex) to absorb the additional spending might affect infrastructure development, which was a key issue during the election campaign. Over the past decade, Delhi’s ratio of capital outlay spending has been declining. For instance:

• In 2013-14, the government allocated 1.1% of the budget to capital outlay, but this dropped to 0.8% by 2023-24.
• The expected capex reduction in FY25 is a 29% decline, with only Rs 5,919 crore allocated for infrastructure projects compared to Rs 8,338 crore the previous year.

The Fiscal Strain Ahead for Delhi

With these significant subsidy promises, the BJP government in Delhi faces the challenge of balancing its welfare agenda with the city’s fiscal health. While the government’s revenue surplus has been a strong point, the increased spending on subsidies could push the city into a revenue deficit, potentially impacting vital infrastructure projects. The decision to honor welfare promises while sustaining fiscal stability will require careful management of resources and priorities in the coming fiscal year.