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Monday, January 12, 2015

Pop Goes The Weasel


Pop Goes The Weasel

As  Delhi/ NCR  braces for a near month long electoral campaign of the Congress, the AAP and the BJP, the three principal contenders aspiring for  the next Government of Delhi, hopefully on a majority basis, promises are flying thick and fast.

Prime Minister Narendra Modi has kicked off the BJP’s  electoral campaign on the 10th of January and has promised pucca housing for all slum dwellers, 24x7 electricity for everybody and portability of the electricity service provider at will, just as in mobile telephony. The BJP has been careful not to make wild election promises, relying instead on what it feels sure it can deliver. Of course, almost all the illegal and unauthorised colonies have already been promised regularisation even before election fever began.

Congress is yet to start its campaign, apart from saying it may agree to support the AAP again if necessary. And AAP, led by the voluble Arvind Kejriwal, the only known CM candidate from any of the competitors in the fray so far, has reiterated a demand for full-statehood. AAP is  also promising all manner of sops and subsidies if it is voted into power. But how exactly does  it plan to pay for its promised largesse?

When one looks at  Delhi’s finances, the usual pattern of profligate spending without a care towards balancing the budget  is curiously absent. The three-term, 15 year-long Congress Government under   former Chief Minister Shiela Dikshit did a pretty  responsible job of fiscal management, despite the CWG and other corruption scams that erupted from time to time. Still, it handed over an essentially robust economy to the 49 day AAP Government, which promptly drew down on most of its reserves.

What’s in the Budget for 2015 for quasi-state Delhi which saves on expenditure because it does not have to pay for its law and order apparatus, its traffic policemen, or its land administration? And it also receives grants from the Centre, plus its own capital receipts and non-tax revenue. All this   put together enhances its income by another 7% or so.

The revenue figure, for 2015, all inclusive, is  estimated at Rs. 36,766 crores, but both the plan and non-plan expenditure  have not made any provision for additional subsidies, which already consume about a quarter of the spending.

When President’s Rule was imposed in Delhi  on 16th February 2014, the six-month ‘on-account’ budget passed by the UPA did not carry forward the  additional  subsidies either.
But, with AAP promising  50% subsidy on electricity, presumably for all the poorer voters, the fiscal health of the capital will be hit hard, provided AAP pulls off a surprise win, and proceeds to live up to its commitments.

The general state of finances of the NCT  is however very healthy presently, comparatively speaking. Its per capita income is three times the national average, based principally on Delhi’s trading and services activities. The total cumulative state debt  stands at about Rs. 30,000 crores, and even this modest sum has been brought down over each of the last three years.

The NCR of Delhi consequently has a very low annual deficit financing figure, and a percentage of under 1% of revenue.

Tax revenues however are on an uptrend, and grew 9% in 2012-13 to Rs. 26,150 crores. This went up  further to Rs. 30,454 crores in 2013-14, up 16%; and is estimated to be marginally higher still at Rs. 36,766 crores in 2014-15, after a year of President’s Rule. This then, is the status on the eve of the fresh elections announced for February 7th, 2015.

The Opinion Polls are indicating a BJP win and majority Government in the 70 MLA Assembly. But if perchance the AAP pulls of an unexpected coup, the finances of the state are likely to be turned on its ear. Kejriwal is constantly making extravagant promises:  he says he will subsidise electricity and water afresh, alongside a host of other populist measures.

This will shoot up the debt figures and leave no revenue money whatsoever to invest in the city’s over-burdened infrastructure. Up to now, about 13% of the revenue was being set aside for infrastructure development, which is not too bad, when viewed from the perspective that it is self-financed from accrued revenue, and not borrowed money, just fuelling deficits.

The 2015 budget provides for a number of forward looking measures, such as: enhancing healthcare via strengthening facilities at existing hospitals, and building both a new medical college and another multi-speciality hospital. There are plans to start 20 new schools, provide toilet facilities for all slums, build 58,000 new unit housing for the economically weaker section ( EWS), enhance water supply, clean the Yamuna, procure 1,380 new low floor buses and 400 more cluster buses, build  two brand new inter-state bus terminals, construct several  more flyovers, and proceed with  stage 2 of the elevated corridor over the Barapullah Nullah. There will also be better, more reliable, electricity transmission and distribution built up.

 Implementation though, under the Lieutenant Governor, has been mostly lagging. This will be the BJP’s main advantage, because Modi  has the creds as a doer, both in the Centre and in the States.

(854 words)
January 12th, 2015

Gautam Mukherjee

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