The article evaluates the fiscal performance of the Aam Aadmi Party (AAP) government in Delhi during its tenure from 2015-16 to 2024-25, comparing it to the previous decade (2004-05 to 2012-13). It focuses on the financial impact of the AAP’s welfare-based governance model, the “Delhi model,” which includes free electricity, water, bus travel for women, and primary healthcare.

Key Points:

• Fiscal Prudence: Both pre-AAP and AAP regimes maintained revenue surpluses and adhered to the Fiscal Responsibility Legislation (FRL) limit for gross fiscal deficit (GFD). However, AAP’s average revenue surplus (-0.82% of GSDP) was lower than the pre-AAP regime (-2.38% of GSDP).
• Debt Reduction: The AAP government significantly reduced Delhi’s debt-to-GSDP ratio from an average of 13.7% in the pre-AAP regime to 2%.
• Expenditure Prioritization: The share of revenue expenditure rose sharply from 58.27% in the pre-AAP regime to 77.63% under AAP, while capital expenditure and outlay decreased significantly, raising concerns about the quality of public expenditure. Expenditure on social and economic services as a percentage of GSDP declined, including critical areas like roads, water supply, sanitation, and urban development.
• Revenue Performance: Revenue receipts as a percentage of GSDP fell from 7.42% in the pre-AAP regime to 5.82% under AAP. Declines in own tax revenue and non-tax revenue were attributed to welfare policies providing free utilities and services. Dependence on central grants increased marginally.
• Conclusion: While the AAP government achieved a notable reduction in debt and maintained fiscal discipline, it compromised capital investment and revenue generation to fund welfare schemes. This approach, though beneficial in expanding social services, led to a decline in public expenditure quality and revenue capacity.