Delhi’s Financial Dilemma on Women’s Scheme

The Delhi government is currently facing scrutiny regarding the Mukhya Mantri Mahila Samman Rashi Yojna (MMMSY). This initiative promises monthly payouts of Rs 1,000 to women. However, the Finance Department has raised concerns about the scheme’s financial sustainability, especially given the city’s borrowing limitations. The proposed scheme was initially announced in the 2024-25 budget. Its implementation has faced delays, notably due to political events.

Scheme Overview

The MMMSY aims to support women financially. The initiative was part of the budget presented by Finance Minister Atishi. It is seen as step towards women’s empowerment. However, the projected financial liability for 2025-26 stands at Rs 4,560 crore. This raises alarms about the fiscal health of the Delhi government.

Financial Implications

The Finance Department’s analysis marks potential risks. High recurring expenditures could burden the budget. The Delhi government cannot raise loans like other states. Its borrowing is restricted to the National Small Savings Fund (NSSF). The limited availability of loans from NSSF adds to the financial strain. The department warns against using costly capital receipts for ongoing revenue commitments.

Current Budget Analysis

In the current financial year, a provision of Rs 2,000 crore has been made for the MMMSY. However, only Rs 1,500 crore is expected to be utilised due to time constraints. Revenue projections indicate that the government is on track to meet its budget estimates. The Finance Secretary has suggested that the scheme’s implementation may need to be postponed.

Other Financial Commitments

The Delhi government is already managing substantial financial liabilities. The Delhi Jal Board’s revenue deficit scheme costs Rs 2,500 crore. This, combined with the MMMSY’s potential liabilities, could result in a total revenue expenditure liability of approximately Rs 7,000 crore for 2025-26. This represents increase in the budgetary pressure.

Future Considerations

The Finance Department has recommended waiting before implementing MMMSY. This approach allows for a better assessment of actual revenue flows. The department will review the scheme’s impact on the budget next financial year. This will help determine if the scheme should proceed.

Revenue Collection Trends

Despite concerns, revenue collection is reportedly higher than expected. The revised estimates indicate an increase of Rs 1,700 crore compared to the original budget. This suggests that the government may not face a revenue deficit as previously feared.

Conclusion on Fiscal Discipline

The Finance Department emphasises the need for fiscal discipline. Aligning revenue expenditure with revenue receipts is crucial. Addressing subsidy impacts will require targeted measures. The future of MMMSY hinges on these financial considerations.

Questions for UPSC:

1. Critically analyse the financial implications of the Mukhya Mantri Mahila Samman Rashi Yojna on Delhi’s budget.
2. Estimate the impact of high recurring expenditures on state finances, using Delhi’s situation as a case study.
3. Point out the limitations faced by the Delhi government in raising loans compared to other state of Indias.
4. With suitable examples, discuss the importance of fiscal discipline in managing state budgets effectively.

Answer Hints:

1. Critically analyse the financial implications of the Mukhya Mantri Mahila Samman Rashi Yojna on Delhi’s budget.

1. The projected financial liability for the MMMSY is Rs 4,560 crore for 2025-26.
2. Implementation could lead to a budgetary deficit of over Rs 8,159 crore.
3. High recurring expenditures may strain the existing budget and limit fiscal flexibility.
4. The government’s reliance on the National Small Savings Fund (NSSF) restricts borrowing capacity.
5. Current provisions of Rs 2,000 crore may not be fully utilized due to time constraints.

2. Estimate the impact of high recurring expenditures on state finances, using Delhi’s situation as a case study.

1. Recurring expenditures create long-term financial commitments, complicating budget management.
2. Delhi’s fiscal health is jeopardized by an incremental liability of approximately Rs 7,000 crore.
3. High expenses can lead to budget deficits, impacting essential services and development projects.
4. The Finance Department warns against using expensive loans for ongoing expenditures.
5. Increased subsidy bills (Rs 10,995 crore) further strain the budget, necessitating sharper targeting.

3. Point out the limitations faced by the Delhi government in raising loans compared to other states of India.

1. Delhi cannot borrow from the market like other states due to regulatory restrictions.
2. Its borrowing is limited to the National Small Savings Fund (NSSF), which has capped availability.
3. The issuance of loans from NSSF is contingent on central government approval.
4. High-cost borrowings can lead to interest liabilities, impacting fiscal sustainability.
5. Delhi’s fiscal expansion relies solely on its own tax and non-tax revenue growth.

4. With suitable examples, discuss the importance of fiscal discipline in managing state budgets effectively.

1. Fiscal discipline ensures alignment between revenue receipts and expenditure, promoting stability.
2. Example – Delhi’s need to manage subsidy bills effectively to avoid budgetary stress.
3. Maintaining fiscal discipline helps in prioritizing essential services and development projects.
4. It prevents reliance on high-cost borrowings, safeguarding against future financial crises.
5. States with disciplined fiscal policies can respond better to economic downturns and unexpected expenses.