Delhi’s cash transfer scheme risks pushing Delhi into revenue deficit

Kejriwal's promise can be costly

Former chief minister Arvind Kejriwal announced on December 12 that his party would give Rs 2,100 per month to eligible women under the Mukhyamantri Mahila Samman Yojana if it returned to power in Delhi in the upcoming elections in February 2025.

A Moneycontrol calculation shows that if the government does indeed go through with the promise of Rs 2,100 per month to women in the state, it will be staring at a Rs 10,000 crore addition to the budget in FY26, almost doubling its subsidy bill.

While the government had budgeted to provide Rs 1,000 per month of support to women in the FY25 budget, with an outlay of Rs 2,000 crore, the spending is expected to ramp up as it increases support significantly. Delhi on December 12 announced the launch of the scheme.

A study by the Delhi government department has pegged the number of women in need for support at 3.8 million. A Rs 2,100 cash transfer would entail Rs 9,576 crore, which may inch higher given the administrative costs of implementing the scheme.

Can Delhi afford it?

The payout is expected to significantly increase the government's subsidy bill, which a study by the government pegged at Rs 10,995 crore, as per FY24 revised estimates.

The scheme may also push the state into revenue deficit.

Delhi's revenue surplus reduced to Rs 4,966 crore in FY24 compared with Rs 14,457 crore in FY23. It is expected to go down further to Rs 3,231 crore. At this pace, with a Rs 10,000 crore extra spend, the surplus may turn to a deficit in FY26.

The Rs 10,000 crore additional spending, if not absorbed by the increase in taxes or cut back in expenditure on other items, may increase the deficit by 1.5 times and amount to nearly 13 percent of the entire state's budget.

This is as much as the Budget for transport for FY24 and more than what the city government spends on health and family welfare.

It is expected to be 62 percent of the state’s education budget of around Rs 16,000 crore and nearly 1.7 times higher than the spending on capital outlay in FY25.

The state plans to spend Rs 5,919 crore on capital projects, compared with Rs 8,338 crore in the previous fiscal.