Delhi Government's Freebies Model: Fiscal Deficit or Revenue Surplus?

The fiscal deficit faced by any state or central government is subject to limits set by the Fiscal Responsibility and Budget Management Act of 2003, with the permissible limit being up to 4% of the state GDP. Hence, providing subsidized services like cheap electricity or water supply by the Delhi government does not necessarily harm fiscal stability.

Kejriwal's PR Campaign on Fiscal Deficit

The Aam Aadmi Party (AAP) government in Delhi has been successful in leveraging public relations efforts to portray the budget as a surplus despite providing freebies. The Comptroller and Auditor General (CAG) has also confirmed that Delhi has no debt sustainability issues due to the growth in its GDP over the years. However, the AAP government has been criticized for relying on freebies, leading to a decrease in revenue surplus and a growing fiscal deficit.

From 2013 onwards, the revenue surplus of the Delhi state budget has steadily decreased, despite the state achieving a net surplus. This trend is alarming and points towards a possible fiscal strain, especially considering the increasing expenditure on freebies, such as subsidy schemes for electricity and water.

Analysis of Freebies Model

The freebies model adopted by the AAP government is seen as problematic. This model may lead to an increase in fiscal deficit if not controlled. However, it is essential to understand that Delhi is currently in a revenue surplus rather than running a fiscal deficit. In fact, the AAP government has managed to maintain a surplus in its budget.

The Delhi government, like other state and central governments, allocates funds for essential services such as education and health to benefit the poor. For instance, the Central Government's UJWALA Yojna aimed to provide free LPG connections to underprivileged households. Similarly, the AAP government could use its surplus revenue to improve access to education and health services for the marginalized communities.

Conclusion: Honesty and Governance

The only mantra of the AAP government is honesty and integrity in governance. Providing essential services to the poor should be a priority, provided it does not breach the fiscal limits. While freebies may increase the cost of government, such measures can be crucial for the welfare of the poor and the long-term development of the state.

It is important to recognize the significance of tax payer's money and the value it brings to the state's development. The AAP government should continue to ensure that their initiatives are sustainable and aligned with the broader goals of enhancing fiscal stability.