Delhi Government Announces Historic Shift to Open Market Borrowing in 2026-27 Budget
In a landmark financial decision, the Delhi government has unveiled plans to borrow from the open market for the first time, with the budget for 2026-27 setting the amount at Rs 16,700 crore. This significant move represents 16% of the total budget of Rs 1.03 lakh crore, signaling a strategic shift in the capital's fiscal management.
Breaking Free from High-Interest NSSF Loans
Historically, unlike other states, Delhi lacked an independent public account and was unable to access market borrowings. Instead, it relied on loans from the National Small Savings Fund (NSSF), which carried higher interest rates. This dependency has been a point of contention, with the government seeking more cost-effective alternatives.
In 2023-24, Delhi refrained from borrowing from the NSSF, and in 2024-25, a request for Rs 10,000 crore from the fund was opposed by its own finance department. The department cited the impending model code of conduct before elections and the high interest rates, recommending a cessation of NSSF borrowings. The following year, the BJP's first budget proposed borrowing Rs 15,000 crore from the NSSF, but this was ultimately rejected, as indicated in budget documents.
Approval for Market Borrowing and Reduced Central Grants
The turning point came in January this year when Delhi signed a Memorandum of Understanding with the Reserve Bank of India, securing approval to borrow from the open market. With the government now proposing Rs 16,700 crore in market borrowings, there has been a concurrent dip in grants and loans from the Centre in the budget presented on Tuesday.
Revised estimates highlight this trend: while last year's budget estimated grants-in-aid from the Centre at Rs 12,095 crore, this dropped to Rs 5,295 crore in revised estimates. This year, grants-in-aid have further decreased to Rs 7,092 crore. For instance, provisions from the Central Road and Infrastructure Funds were reduced from Rs 1,000 crore to Rs 212.4 crore in revised estimates, now standing at Rs 591 crore.
Strategic Financial Moves and Future Outlook
As Delhi exits NSSF borrowing, overall loans and advances from the Centre have decreased. However, the Rekha Gupta government has proposed borrowing Rs 2,500 crore under the Special Assistance to the States for Capital Investment (SASCI) scheme, aimed at boosting infrastructure development with favorable terms.
A senior Delhi government official explained that the shift towards market borrowings is driven by a desire to reduce fiscal burden, as open-market loans typically offer interest rates of 6.5% to 7.5%, compared to 8% under NSSF. He emphasized that the SASCI scheme provides easy project-based loans with a 50-year repayment schedule, benefiting capital expenditure initiatives.
Regarding the reduction in grants-in-aid, the official noted that Delhi has historically received lower amounts due to its strong resource position. With increased spending on capital expenditure, the government anticipates higher allocations compared to revised estimates, reflecting a proactive approach to financial management.
