Capital conundrum: Welfare promises versus infra push ahead of Delhi polls

Amid increasing poll promises ahead of Delhi elections, the spending choices of Congress and AAP regimes, and the fiscal challenges ahead for the next government

The political scenario in Delhi is often criticised for promoting “revdi culture”, which has become central to election promises across parties. This criticism stems from a perceived prioritisation of social welfare schemes over infrastructural development. In recent years, inadequacies in Delhi’s infrastructure have become increasingly evident, adding weight to these arguments.

 

A comparison between Sheila Dikshit government and the Aam Aadmi Party regime shows the differences not just in spending figures but in the underlying governance philosophy driving these choices.

 

During Dikshit’s tenure (2004–2013), Delhi saw a steady rise in revenue expenditure, which grew from just over Rs 5,000 crore in 2004 to more than Rs 22,000 crore by 2013. Revenue expenditure accounted for about 45 per cent of total expenditure in 2004, but increased to about 65 per cent by 2013. While revenue expenditure gained momentum during this period, there was also a conscious effort to allocate substantial funds for infrastructure projects. 

 

Capital outlay during this period peaked in 2007-08, crossing 20 per cent of the total expenditure, and remained in double digits throughout her time in office. Her government focused on building flyovers, expanding the Delhi Metro network, and enhancing basic infrastructure, which became defining features of her governance.

 

In contrast, the Aam Aadmi Party (AAP) government, which assumed office in 2014, shifted the focus almost entirely towards social welfare schemes. Revenue expenditure saw a sharp and consistent rise, reaching around 80 per cent of the total expenditure in the 2024-25 Budget Estimates, even peaking at 82.5 per cent in 2017-18. The government was headed by AAP supremo Arvind Kejriwal till around the middle of September 2024. Since then, Atishi Singh has been the chief minister of the state.

 

Welfare initiatives, such as free water, subsidised electricity, improved healthcare services, and education reforms, became the central pillars of Delhi’s fiscal strategy. However, this shift came at the expense of capital outlay, which fell to single digits as a percentage of total expenditure, reaching its lowest point at just 7.06 per cent in 2018-19. It is again estimated that capital outlay will form a very small portion of the total expenditure at just 7.79 per cent in 2024-25. Capital outlay for 2024-25 is proposed to be Rs 5,919 crore, a decrease of 29 per cent from the revised estimate for 2023-24.

 

During AAP’s term, the national capital’s revenue surplus was consistently lower than it was under Dikshit. Revenue surplus during Dikshit’s tenure remained relatively high, peaking at 5.88 per cent of the Gross State Domestic Product (GSDP) in 2010-11. 

 

The AAP government saw a sharp decline in revenue surplus, with estimates for 2024-25 showing it at just 0.3 per cent of GSDP. However, the fiscal deficit under the AAP regime has remained relatively smaller due to a reduction in capital outlay. The fiscal balance saw marginal improvements in certain years, but reduced infrastructure spending was a key factor in maintaining fiscal stability.

 

Government debt also declined under the AAP administration, remaining below 2 per cent of the state GSDP, compared to higher levels during Dikshit’s early tenure, which peaked at 18.9 per cent in 2006-07.

 

As Delhi’s Assembly elections are expected to be announced any time soon, the electoral battle is heating up with major parties unveiling various schemes to secure votes.

 

The AAP, which is making a bid to win a fourth consecutive term, has announced several key promises to secure votes, including expanding the old-age pension scheme beneficiaries to over 0.5 million, adding 80,000 more recipients, and launching an online portal for applications. The party also promised the Pujari Granthi Samman Yojana, offering a monthly allowance of Rs 18,000 for Hindu temple priests and gurdwara granthis. The party also vowed financial assistance to women from families with an annual income below Rs 3 lakh, starting with Rs 1,000 monthly, increasing to Rs 2,100 if re-elected. The Dr Ambedkar Samman Scholarship Yojana was also offered, covering fees, travel, and stay for Dalit students admitted to top international universities.

 

The Congress has pledged free electricity up to 400 units per month if it assumes power in Delhi. Meanwhile, the Bharatiya Janata Party (BJP) has promised to continue the AAP government’s popular schemes, including free electricity, water subsidies, and free bus rides for women, should it come to power in the upcoming elections.

 

However, Delhi’s robust tax revenue generation capacity, with its consistently high figures, means that the promises made by the political parties may not put strong pressure on the city’s finances. Despite the rising focus on welfare schemes and subsidies, the ability to generate substantial tax revenue provides the government with the flexibility to finance these initiatives without risking fiscal instability. This is reflected in the fact that the state’s own tax revenue as per cent to revenue receipts has remained high — between 74 per cent and 92 per cent over the 20-year period — ensuring that the government can fund its promises without excessive reliance on debt.

 

While this fiscal strength allows the government to continue its welfare schemes, it also underscores the need for a more balanced approach to governance. The low capital outlay and focus on social welfare, though manageable in the short term, may eventually limit the city’s growth potential if infrastructure challenges are left unaddressed.