Delhi Budget: CM Rekha Gupta junks AAP populism, pivots to capex

While some of the pivot towards capex is a political call, some of it could well be a result of better synergy between the Centre and the Delhi government.

Delhi’s fiscal priorities have made a huge pivot from the politically rewarding populism of Aam Aadmi Party’s 10-year rule to capital expenditure under the current Rekha Gupta-led Bharatiya Janata Party (BJP) government.

Chief minister Gupta, who also holds the finance portfolio in the Delhi government, presented her second budget on Tuesday. (HT Photo/ Raj K Raj)

This is best seen in a 10-percentage point increase in the share of capital spending in the city state’s (technically a Union territory’s) budget under the current government. If implemented well, not just in terms of money being spent, but money spent wisely, effectively and sustainably, this could be a much-needed policy turnaround for the declining fortunes and living standards of the national capital. While some of the pivot towards capex is a political call, some of it could well be a result of better synergy between the Union government and the Delhi government which had completely broken down during the AAP government’s latter phase.

Chief minister Gupta, who also holds the finance portfolio in the Delhi government, presented her second budget on Tuesday. The Government of National Capital Territory of Delhi will spend ₹1,03,700 crore in 2026-27, the budget said. ₹30,799.72 crore of this amount has been allocated to capital expenditure. This makes 2026-27 the second consecutive year when Delhi’s capital spending will be in the ballpark of 30% of the overall expenditure.

According to the Centre for Monitoring Indian Economy (CMIE) database, Delhi’s capital spending share never crossed 30% under the AAP government and in fact only crossed 25% once -- in 2015-16.

“With education, healthcare, transport, housing and social welfare at its core, this budget strengthens infrastructure, enhances quality of life and expands opportunities for every citizen. From better schools and hospitals to stronger roads, clean water, sustainable energy and a renewed focus on rural Delhi, every sector reflects progress and Seva, Sushasan and Vikas,” CM Gupta said in on X.

While it is early days for the current government, the capex share numbers for past two years are on track to getting back to what they used to be in the pre-AAP days, for 15 years under Sheila Dikshit’s Congress government. A large part of the city’s infrastructure, including the Delhi Metro was built during those years. This, more than anything else, is the key takeaway from this year’s Delhi budget.

AAP, under its leader Arvind Kejriwal and riding the tailwinds of the India Against Corruption movement, stormed to power in Delhi on promises of populist benefits such as subsidised water and power bills. To be sure, it also made large spending in sectors such as health and education. While these policies gave it a formidable support among the national capital’s underclass, it lost power after losing critical support among the non-poor in the 2025 elections. As irony would have it, a lot of the non-poor anger against the AAP was a result of deteriorating infrastructure, which suffered because of lack of capex but also because of a complete breakdown of cooperation between AAP’s Delhi government and the BJP government in the centre.

The Delhi government’s proposed spending of ₹1.03 lakh crore is only marginally higher than the 2025-26 Budget Estimate (BE) figure of ₹1 lakh crore. The 2025-26 BE spending number was a huge jump over the ₹61,471 crore in 2024-25, the last year of the AAP government.

2025-26 Revised Estimate (RE) numbers show that the government’s spending has fallen marginally short of its BE number and stood at ₹99,310 crore. A revenue expenditure and capital expenditure break-up of the 2025-26 BE and RE numbers show that the government spent less than what it budgeted on revenue expenditure ( ₹66,710 crore in RE compared to ₹71,884.5 crore in BE) and more on capital expenditure ( ₹32,600 crore in RE compared to ₹28,115.5 crore in BE).

On the receipts side, the government largely matched its tax projections in 2025-26 with an own tax revenue of ₹65,700 crore in RE numbers against ₹68,700 crore in BE. The 2026-27 BE numbers project an own tax revenue of ₹74,000 crore.

Gupta’s budget speech said that Delhi’s tax-GSDP ratio is expected to increase from 4.95% in 2025-26 to 5.09% in 2026-27. When read with the BE number of ₹74,000 crore in own tax revenue in 2026-27, a tax-GSDP ratio of 5.09% entails a nominal GSDP of ₹14.53 lakh crore for Delhi in 2026-27. This would mean a nominal GSDP growth rate of 9.5% in 2026-27 for Delhi, not very different from 9.4% in 2025-26.

To be sure, it is likely that the Delhi Budget has not taken into account the economic disruption on account of the ongoing war in West Asia and the associated headwinds for Indian economy. The budget puts the fiscal deficit of Delhi at ₹22,289 crore in 2025-26 (RE) and ₹16,966 crore in 2026-27 (BE) which comes to about 1.7% and 1.2% of GSDP respectively.

Delhi will also see an increase in its market borrowings which are expected to increase from ₹5,000 crore in 2025-26 (RE) to ₹16,700 crore in 2026-27 (BE). Seen another way, market borrowings are more than half of the proposed capex in Delhi in 2026-27. Delhi government had signed an MoU with RBI in January this year which brought the national capital under RBI’s full banking, cash management and debt framework for the first time making it possible for it to be able to raise market debt on its own). Some of the rise in market borrowing will just substitute borrowings from the central government which have fallen from ₹15,380 crore in 2025-26 BE numbers to just ₹380 crore in 2026-27 BE. To be sure, Delhi does plan to borrow more money from the centre’s Special Assistance to States for Capital Investment (SASCI) programme which is expected to be ₹2,500 crore in 2026-27.

Delhi’s pivot from revenue to capital spending need not be seen as a squeeze on existing revenue spending in the city. In absolute terms, the 2026-27 revenue spending amount is 1.5 times what it was in 2024-25, the last year of the Kejriwal government. This is largely a reflection of the size of the budget increasing significantly during this period. Having said that, the current government has held back on implementing some of its key populist promises such as the proposed ₹2,500 per month cash-transfer programme to women even though money was allocated for it in the last budget and has also been allocated in this one.