Financial crisis looms in Delhi as extra spending tips city into revenue deficit

Despite its recent history of fiscal surpluses, Delhi is on the brink of a potentially severe financial crisis. The financial summary of the Government of the National Capital Territory of Delhi (GNCTD) indicates a continuous streak of fiscal surplus from the fiscal year 2017-18 through the projected budget of 2024-25.
The revenue receipts have consistently been higher than the revenue expenditure, starting with a surplus of Rs 4,913.25 crore in 2017-18, which further increased to a significant surplus of Rs 14,456.91 crore in 2022-23. Even for the fiscal year 2023-24, a healthy surplus of Rs 6,462.29 crore is anticipated. However, the forecast for 2024-25 presents a potential challenge: while the initial budget estimates (BE) show a surplus of Rs 3,231.19 crore, the possible inclusion of additional demand could lead to a deficit of Rs 1,495.48 crore.

Several departments have underscored additional resource needs, which strain the budget further. The financial situation of the Delhi Government, as outlined by the Budget Estimates for the fiscal year 2024-2025, suggests a cautious stance amidst mounting fiscal demands. The legislative assembly has approved a budget with anticipated receipts in the vicinity of Rs. 61,000 crore. These funds are primarily allocated to cover revenue expenditures essential for running the government, addressing operational costs, maintaining infrastructure, and subsidising welfare schemes.

However, additional resource requirements on the revenue front have been identified, potentially straining the budget further. Key departmental needs include Rs. 141 crore for the Law Department to fund pensions and allowances in alignment with the 2nd National Judicial Pay Commission recommendations. The Power Department seeks Rs. 512 crores for consumer subsidies channelled through DISCOMs, while the Transport Department requires Rs. 941 crore to support the viability of electric buses. Moreover, the Health Department is earmarked for expenditures on the remodelling of hospitals due for completion this year.

Additional pressing needs include Rs. 447 crore for the Irrigation and Flood Control department for necessary de-silting and restoration works, and a significant Rs 3,271 crore for the Delhi Metro Rail Corporation (DMRC), addressing operational losses from the COVID-19 pandemic and loan obligations to the Japan International Cooperation Agency (JICA). An extra Rs. 250 crore is also necessary for acquiring the University College of Medical Science under the Health and Family Welfare Department. These requirements amount to an additional Rs 7,362 crore.

With a monthly expenditure on salaries, wages, and interest repayments pegged at Rs 2,240 crore and a current cash reserve of Rs 4,471 crore, the Delhi Government is confronting a fiscal challenge. This financial scenario underscores concerns over the government’s ability to sustain even two months of operational expenses, stressing the imperative for strategic fiscal oversight and possibly seeking avenues for additional revenue generation or cost-cutting measures.